By Jonathan Stempel
A U.S. regulator on Friday charged three men with insider trading ahead of Long Island Iced Tea Corp’s announcement it would change its name to Long Blockchain Corp, and change its focus to blockchain from iced tea and lemonade, which caused its shares to soar nearly 400 percent.
The U.S. Securities and Exchange Commission said Eric Watson, who controlled more than 30 percent of Long Island Iced Tea shares, leaked the news to his friend and broker Oliver-Barret Lindsay, who passed it to his friend Gannon Giguiere, a stock promoter.
According to the SEC, Giguiere bought 35,000 Long Island Iced Tea shares on Dec. 20, 2017, and sold them the next day for a $162,500 profit less than two hours after the Farmingdale, New York-based company’s self-described “pivot” became public.
Long Island Iced Tea’s share price rose as much as 388% that day, boosting its market capitalization to $92.6 million from $23.8 million.
The SEC said a colleague of Lindsay’s asked him in a chat message that day why he wasn’t told in advance to buy Long Island Iced Tea, and Lindsay replied: “I think I told everyone.”
Lawyers for Lindsay and Giguiere did not immediately respond to requests for comment. A lawyer for Watson could not immediately be located.
The SEC said Watson, 60, is a New Zealand citizen believed to live in London; Lindsay, 44, is a Canadian living in Vancouver; and Giguiere, 47, lives in Newport Coast, California.
It is seeking to impose civil fines and recoup illegal profits. The lawsuit was filed in Manhattan federal court.
Long Island Iced Tea’s changes were part of trend of companies reshaping their business models to profit from blockchain technology, which supports cryptocurrencies.
The case is SEC v Watson et al, U.S. District Court, Southern District of New York, No. 21-05923.
(Reporting by Jonathan Stempel in New York; Editing by Andrea Ricci)