Blockchain Scandal: Insider Trading Charges Filed Over Long Island Iced Tea Blockchain ‘Headpin’
At the time, the episode highlighted the excessive hype around the crypto space. Now regulators say the name change was at the heart of an illegal insider trading scheme.
The SEC said Barret-Lindsay, a Canadian citizen who owned a company incorporated in the Cayman Islands, then shared this material, nonpublic information with a friend named Gannon Giguiere, who owned and operated a stock promotion website.
“Within hours of receiving this confidential information, Giguiere purchased 35,000 shares of Long Blockchain,” the SEC said.
The next day, December 21, 2017, Long Island Iced Tea Corp., until then exclusively a soft drink maker, announced its makeover, describing the pivot to blockchain as a “once in a generation opportunity.”
Even though the company had no real blockchain-related business at the time and no experience in cryptocurrencies, its Nasdaq-listed stock price skyrocketed and trading volume soared by 1 000%.
“Within two hours of the announcement, Giguière sold his shares for more than $160,000 in illicit profits,” the SEC said.
Confidential source and encrypted messaging
The agency charged all three of them with insider trading.
The complaint says the SEC is seeking permanent injunctions and civil penalties against all three. The SEC also wants to bar Watson, a New Zealand citizen who controlled 30% of the shares of Long Island Iced Tea Corp., from acting as an officer and director of a public company.
“The SEC remains committed to preventing all types of fraudulent conduct in connection with purported ‘crypto’ companies, including profiting from the trading of material nonpublic information,” said SEC Regional Office Director Richard Best. in New York, in a press release.
Neither the company nor the three people charged were available for comment on Saturday.
The SEC complaint cited messages sent on an unnamed encrypted messaging app as well as communications with “Individual A,” who allegedly participated in stock promotion programs with Lindsay and Giguiere. The agency said “Individual A” acted as a confidential source for law enforcement.
