The (former) Long Island Iced Tea Corp. is being investigated by the FBI for insider trading and securities fraud. The accusations are being linked to the company notoriously changing its name to ‘Long Blockchain Corp.’ in December of 2017 which subsequently caused its stock to explode by 300 percent.
During the ‘Bitcoin bubble’ of 2017, one particular company decided to use the bull market to its utmost advantage. Long Island Iced Tea notoriously changed its name on December 21, 2017. and announced it was “shifting its primary corporate focus” from tea to blockchain.
The end result was madness. Although the company’s stock jumped some 300 percent, it was later delisted from the Nasdaq stock market and investigations were initiated by the SEC and FINRA. Long Island Iced Tea tried to shamelessly latch onto the crypto-hype train, but it might soon come back to haunt them even more than it already has. It was recently announced that the FBI has issued a search warrant request for the company.
FBI: Insider Trading and Securities Fraud Suspected
The FBI is hoping to find evidence of insider trading and securities fraud connected to the brand name change. The focus of the current investigation is primarily on two men, Oliver Lindsay and Gannon Giguiere, who were previously charged with securities fraud in a separate case involving Kelvin Medical.
The FBI also believes that the company was trying to consciously conduct a ‘pump-and-dump‘ scheme. The inside traders involved are suspected of mass buying Long Island Iced Tea stock and then dumping it on the market after the rebrand and price spike. The FBI even suspects that some of these profits were distributed in offshore bank accounts.
The FBI is mainly digging up prior conversations sent via mobile phones for the investigation. Although Julian Davidson, Long Island Iced Tea Corp’s executive chairman, has not been implicated it seems unlikely he was not involved. Davidson also suspiciously resigned from the board a few days before the name change was officially announced.
Convictions Seem Likely
It seems all but certain that the FBI will press charges. SEC chairman Jay Clayton warned about such ideas in January of 2018, telling the public that they were looking closely at companies shifting their business models to blockchain in order to capitalize on the hype.
Davidson, the former executive chairman, even filed legal action against the company in March of that year. It’s still unclear whether he was doing so in an attempt to avoid a conviction himself.
At the height of its hype, the Long Island Blockchain Corp. was valued at more than $60M but has since plummeted to $9M. The company now specializes as a subsidiary for gift cards and loyalty programs as it continues to see its quarterly losses add up.
It seems likely that once the FBI investigation closes, the company will be relegated to the dustbin.
Can you recall other companies who tried to disingenuously ride off the blockchain hype train in 2017? Let us know your thoughts on this story in the comments below.