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Long Blockchain tried to ‘mislead investors,’ Nasdaq says

The Farmingdale firm, formerly Long Island Iced Tea Corp., tried “to take advantage of general investor interest in bitcoin and blockchain technology,” the market says.

A Long Island Iced Tea delivery truck sits

A Long Island Iced Tea delivery truck sits outside the Farmingdale offices of Long Blockchain Corp. Photo Credit: Newsday / Kenneth Schachter

Long Blockchain Corp., the Farmingdale company formerly known as Long Island Iced Tea Corp., made “public statements designed to mislead investors and to take advantage of general investor interest in bitcoin and blockchain technology,” according to a delisting notice from the Nasdaq Stock Market.

That language was disclosed in an amended Securities and Exchange Commission filing by the company late Wednesday.

In the latest filing, the company said it “strongly disagrees” with the determination of the Nasdaq staff and has filed an appeal that will allow the company’s stock to continue trading.

Last Friday, in an SEC filing disclosing that the Nasdaq had sent it a delisting notice under its “discretionary authority,” the company omitted mention of the Nasdaq staff’s concerns about “the company’s suitability for exchange listing.”

The latest filing said the Nasdaq staff believed that the company’s statements about cryptocurrency and blockchain technology enabled it to “regain compliance” under the Nasdaq Capital Market rule requiring that listed companies maintain a market value of $35 million.

Long Blockchain’s shares fell 6.6 percent to close Thursday at $2.85, putting its market capitalization at about $33 million. The company’s stock soared as high as $9.49 in December after it announced it was shifting focus from producing ready-to-drink beverages to businesses involving cryptocurrencies like bitcoin and blockchain technologies.

Nasdaq Capital Market rules require that the stock market value of listed securities remain at $35 million or more for at least 10 consecutive business days, though the Nasdaq has the discretion to monitor compliance for as long as 20 consecutive business days before deeming the company in compliance, the filing said.

Alternatively, the filing said, companies must maintain a stockholders’ equity minimum of $2.5 million, which can be calculated as total assets minus total liabilities.

On Tuesday, the company announced a plan to spin off its iced tea business to shareholders, and appointed Shamyl Malik, a veteran financial services executive, as its new chief executive.

Malik declined to comment on the Nasdaq notice but said Thursday he plans to focus on implementing the company’s blockchain technology strategy.

On Oct. 9 the company, then known as Long Island Iced Tea Corp., received an earlier Nasdaq delisting notice based on its failure to maintain the $35 million minimum market value. That SEC filing said the company would have until April 9 to regain compliance.

On Dec. 20, Long Island Iced Tea’s shares closed at $2.44, but the next day the company unveiled its new name and business plan, sending the stock soaring 183 percent to a closing price of $6.91 and a market value far above the $35 million threshold.

Swings in the price of bitcoin, the most widely known cryptocurrency, have spurred investor interest. Bitcoin was trading at about $9,900 Thursday after reaching a 52-week high of almost $20,000 in December.

But cryptocurrencies also have attracted increased regulatory scrutiny. Earlier this month the SEC said it suspended trading in three companies “amid questions surrounding similar statements they made about the acquisition of cryptocurrency and blockchain technology-related assets.”

Mitchell O. Goldberg, president of Melville investment advisory firm ClientFirst Strategy Inc., said in an email that investors should steer clear of “the hot bandwagon of the day.”

Regulators can be slowed by protocols and appeals, he said, but those delays can put “novice investors” in harm’s way.

Bitcoin and other cryptocurrencies are digital currencies that are not controlled by a centralized bank or government and allow users to spend money anonymously. The coins are created by users who “mine” them by lending computing power to verify other users’ transactions. They receive coins in exchange. A blockchain is a decentralized digital ledger of every transaction in the currency.

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