Risk & Compliance

Three Sued Over Blockchain Firm Trading

The SEC says the controlling shareholder of Long Blockchain and two associates engaged in insider trading ahead of market-moving news.
Matthew HellerJuly 12, 2021

The controlling shareholder of Long Blockchain has been charged with tipping off his broker about the company’s pivot to blockchain technology before it was publicly announced.

The U.S. Securities and Exchange Commission said Eric Watson, a New Zealand national, engaged in an insider trading scheme with Oliver Barret-Lindsay, his friend and broker, and stock promoter Gannon Giguiere, that allegedly resulted in Giguiere making a profit of $162,500 on Long Blockchain shares.

According to the SEC, Watson tipped off Lindsay in December 2017 that the company formerly known as Long Island Tea would be switching from making iced tea and lemonade to providing blockchain technology and Lindsay passed the tip on Giguiere.

Lindsay, a Canadian who is the principal of CMGT Capital Management, and Giguiere, a California resident, both pleaded guilty in 2019 to criminal charges that they defrauded investors through pump-and-dump stock manipulation schemes, while Watson previously agreed to a settlement of civil insider trading charges in 2001.

“The SEC remains committed to preventing all types of fraudulent conduct in connection with purported ‘crypto’ companies, including profiting from trading on material non-public information,” Richard Best, director of the SEC’s New York Regional Office, said in a news release.

Long Island Tea was formed in 2015 through a merger between Long Island Brand Beverages and Cullen Agricultural, a company controlled by Watson. By September 2017, Watson controlled more 30% of LTEA’s stock and by December 2017, he had convinced the company to pivot to the blockchain.

The SEC said Watson discussed his plans for LTEA with Lindsay throughout late 2017 and on Dec. 19, 2017 began sharing various drafts of the announcement of the blockchain pivot with him. After receiving the final draft on Dec. 20, Lindsay allegedly sent it to Giguiere, whom he had previously introduced to Watson for the purpose of promoting LTEA on Giguiere’s TheMoneyStreet.com website.

Within hours of receiving the draft, Giguiere allegedly bought 35,000 LTEA shares at an average cost of $2.42 per share. On Dec. 21, when LTEA issued the press release, the stock price jumped 183% and Giguiere sold the shares, the SEC said.