UPDATE: Ubiquiti Networks Responds to Charges Made by Former Distributor

Ubiquiti Networks

responded Sunday to charges by a former distributor, Asim Sajwani. His Dubai-based company, X-Concepts, was the master distributor for the Middle East region. Shares of Ubiquiti stock plunged on Thursday following a

, suggesting the SEC was "looking into" the company. Mr. Sajwani claims that he was contacted by

regarding movements of cash by Ubiquiti and shipments to Iran. Sajwani says the investigators were also interested in Ubiquiti's Florida-based Latin American distributor, Flytec. A spokesperson for Ubiquiti Networks refers to Sajwani as a "disgruntled former distributor" who started his blog posts after the company was awarded a $2.1 million judgment against him. Sajwani told Benzinga that CEO Bob Pera had asked him to open a "secret" bank account in Dubai to handle transactions. The Ubiquiti spokesperson confirms an email sent by Mr. Pera to Sajwani asking if the bank account information was "confidential" and asked if $140,000 could be wired by Ubiquiti to the account for expenses. Ubiquiti confirms that money was to be used to rent office space and hire staff and that there was nothing secret about the account. Ubiquiti says allegations of sales to Iran are from events that were "fully investigated by the BIS" and the investigation was closed with just a warning letter. The company also dismisses charges of dealings with the "Chinese Mafia" attributing it to an "anonymous" and "totally uncorroborated post". Mr. Sajwani claims the Pera walked into his office in Dubai and threatened to "destroy" him and his family if he did not immediately shut down operations. Ubiquiti says that Sajwani had asked for a payment of $5 million to "go away". While Ubiquiti does concede that its possible Mr. Sajwani was contacted by the SEC, that alone does not constitute an investigation. In fact, no one from that agency has contacted Ubiquiti. Shares of Ubiquiti Networks rallied Friday almost 18%, following denials by the company that there was an investigation. Mr. Sajwani has denied he was working with short sellers and says that it was the popularity of his blog

that may have contributed to its spreading throughout Twitter and various chat rooms on Thursday. A check shows there are a total of 6 subscribers to the RSS feed. The Ubiquiti spokesperson told Benzinga the company is "financially strong" and will "weather these malicious rumors and efforts at stock manipulation".