A New Zealand businessman who secretly controlled Long Island Iced Tea Corp. reaped profits from insider information when he leaked plans to change its name to Long Blockchain in December 2017, the Securities and Exchange Commission charged Friday.
Insider trading charges were filed against the businessman, Eric J. Watson, 60, and two associates in U.S. District Court in Manhattan.
The company's 2017 name change came during an investor craze related to cryptocurrency such as Bitcoin. Blockchain is the digital framework on which cryptocurrencies operate.
In February, the SEC delisted Long Blockchain from over-the-counter trading, citing the "protection of investors" and the Farmingdale company's failure to file annual and quarterly reports as required of public companies.
The complaint characterizes Watson as a "corporate insider and the controlling shareholder" of Long Island Iced Tea, overseeing more than 30% of the common stock as of September 2017.
The complaint said that Watson alerted his friend and broker, Oliver-Barret Lindsay, of plans to change the company's name to Long Blockchain and showed him a draft of a press release with details.
Lindsay, of Vancouver, British Columbia, passed the information to a friend, Gannon Giguiere, who bought 35,000 shares of the company's stock, according to the complaint.
The stock rose almost fourfold after the press release went public and Giguiere, of Newport Coast, California, sold the stock within two hours, making "illicit profits" of more than $160,000, the complaint said.
The SEC in July 2018 charged Lindsay and Giguiere in connection with a pump-and-dump stock trading scheme involving a purported medical device company. They pleaded guilty in that case, the SEC said.
Calls to the offices of Long Blockchain were not returned and contact information for representatives of the defendants was unavailable.
The complaint calls for Watson, Lindsay and Giguiere to disgorge profits and interest from the illicit stock trade, pay unspecified civil penalties and permanently bar Watson from serving as an officer or director of a company with registered securities.
Long Blockchain has cycled through several CEOs, sold its iced tea business and announced a variety of unrealized strategies related to cryptocurrencies since the name change, including a plan to buy specialized computers that "mine" bitcoin.
After the delisting in February, the company named Toby Carroll as its latest CEO.