The U.S. Federal Bureau of Investigation (FBI) has filed a search warrant request for a trading and securities fraud investigation related to the blockchain pivot of Long Island Iced Tea (LTEA).
Quartz reported that the FBI wants to gain access to encrypted messages held on a phone seized in a different case involving securities fraud at another firm, Kelvin Medical. Two men, Oliver Lindsay and Gannon Giguiere, were arrested in that case, and when agents searched Lindsay’s iPhone, they found signs of insider trading involving LTEA stock based on traces of encrypted phone messages. The FBI now wants to retrieve those messages in full.
In 2017, LTEA made a pivot to blockchain and changed its name to Long Blockchain so that it could shift “its primary corporate focus” from tea to distributed-ledger technology. The move caused its stock to soar nearly 300 percent, but the company found itself delisted from Nasdaq due to suspicions that the shift was made to boost its stock. It was also subpoenaed by the U.S. Securities and Exchange Commission (SEC).
“Anytime there’s a new technology like blockchain, and there’s any kind of mania around it, this is what the fraudsters take advantage of,” said Joshua White, assistant professor of finance at Vanderbilt University.
The FBI warrant states that in the encrypted messages Lindsay and “other individuals” had “discussed what appears to be confidential information regarding LTEA.” In addition, one of the individuals mentioned in the warrant is identified on the phone as “Eric W,” whom the FBI believes is Eric Watson, a major investor in LTEA at the time of the pivot.
The warrant also states that there were several urgent messages between Lindsay and “Eric W,” including one that the FBI agent believes “refers to common aspects of a pump-and-dump campaign.”
The FBI also explained that Lindsay sent a text file and messages via WhatsApp with the contact information for a person named Julian Davidson, who was the executive chairman of LTEA.
The FBI said there is probable cause to suspect that Lindsay and Giguiere had “conspired with each other and others to, and did, trade LTEA securities on the basis of material, non-public information,” violating various laws.