Last Friday, the Securities and Exchange Commission (SEC) complained that three individuals violated securities laws in advance of a big December 2017 announcement by Long Blockchain Company (LBC), formerly known as Long Island Iced Tea Co. The civil complaint, filed in the Southern District of New York, alleged Eric Watson, an LBC corporate insider and the controlling shareholder, leaked information to his friend and broker, Oliver Barret-Lindsay, who in turn tipped his friend, Gannon Giguiere.
According to the filing, the announcement concerned the company’s new business trajectory, reportedly a “‘once-in-a-generation opportunity.’” LBC planned to change from selling beverages to blockchain technology, which, when publicly announced, caused its stock price to skyrocket. The SEC claimed that prior to the announcement, Watson shared material, non-public information with Barret-Lindsay, including a draft of the company’s news release.
Allegedly, the broker then tipped Giguiere, who purchased 35,000 shares of LBC stock within hours of receiving the information. The company’s share price jumped more than 380% in one day following the announcement, reportedly earning Giguiere $162,500 in illicit profits once he sold the shares the following day.
The complaint charged each defendant with the requisite state of mind: that they passed or acted on information concerning LBC’s announcement that they “knew, consciously avoided knowing, or was reckless in not knowing” was both material and non-public. In turn, the filing claimed that Watson, Barret-Lindsay, and Giguiere violated the Securities Exchange Act of 1934, and seeks permanent injunctions, disgorgement, and statutory civil penalties as to all defendants, and, in addition, an officer and director bar as to Watson.
The SEC’s press release noted that previously, Barret-Lindsay and Giguiere were charged with parallel criminal offenses and pled guilty to those. The SEC also voided LBC’s securities registration earlier this year for making a sequence of public statements designed to mislead investors and leverage the growing interest in bitcoin and blockchain technology investment, the complaint said.
