Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 1 of 19
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`RICHARD R. BEST
`REGIONAL DIRECTOR
`Sanjay Wadhwa
`Sheldon L. Pollock
`John O. Enright
`Mark R. Sylvester
`Lindsay S. Moilanen
`Attorneys for Plaintiff
`SECURITIES AND EXCHANGE COMMISSION
`New York Regional Office
`Brookfield Place
`200 Vesey Street, Suite 400
`New York, New York 10281-1022
`(212) 336-0159 (Sylvester)
`sylvesterm@sec.gov
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`SECURITIES AND EXCHANGE
`COMMISSION,
`
` Plaintiff,
`
` -against-
`
`ERIC J. WATSON,
`OLIVER-BARRET LINDSAY, and
`GANNON GIGUIERE,
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` Defendants.
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`
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`COMPLAINT
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`21 Civ. _____ ( )
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`
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`JURY TRIAL DEMANDED
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`
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`Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against
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`Defendants Eric J. Watson (“Watson”), Oliver-Barret Lindsay (“Lindsay”), and Gannon Giguiere
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`(“Giguiere”) (collectively, “Defendants”), alleges as follows:
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`SUMMARY
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`1.
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`This matter involves an insider trading scheme conducted in late 2017, in which
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`Watson, a corporate insider and the controlling shareholder of Long Island Iced Tea Corp. (now
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`known as Long Blockchain Corp.) (hereinafter, “LTEA”), tipped his friend, business associate, and
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 2 of 19
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`broker, Lindsay, with material nonpublic information regarding LTEA’s impending announcement
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`that it was significantly changing its business from soft drink manufacture to blockchain technology
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`(the “Announcement”). At the time, LTEA’s shares were publicly traded on NASDAQ.
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`2.
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`On December 20, 2017, Lindsay conveyed this material nonpublic information
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`regarding the impending Announcement to Giguiere, his friend and co-conspirator in prior market
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`manipulation schemes. Within hours of receiving this confidential information, Giguiere purchased
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`35,000 LTEA shares.
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`3.
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`On the following day, December 21, 2017, LTEA issued the Announcement, stating
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`that LTEA was “shifting its primary corporate focus towards the exploration of and investment in
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`opportunities that leverage the benefits of blockchain technology” compared to “the ready-to-drink
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`segment of the beverage industry,” as well as changing its name to “Long Blockchain Corp.” in
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`place of “Long Island Iced Tea Corp.”
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`4.
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`As a result of the Announcement, the company’s stock price and trading volume
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`skyrocketed, with the intraday stock price spiking 388%, on increased trading volume of 1,000%,
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`before closing at $6.91, an increase of more than 180% from the prior day’s closing price.
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`5.
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`In less than two hours following the Announcement, Giguiere sold the 35,000 LTEA
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`shares he had purchased the day before, realizing $162,500 in illicit profits.
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`VIOLATIONS
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`6.
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`By virtue of the foregoing conduct and as alleged further herein, Defendants
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`Watson, Lindsay, and Giguiere have violated Section 10(b) of the Securities Exchange Act of 1934
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`(“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
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`7.
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`Unless Defendants are restrained and enjoined, they will engage in the acts, practices,
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`transactions, and courses of business set forth in this Complaint or in acts, practices, transactions,
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`and courses of business of similar type and object.
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`2
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 3 of 19
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`NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
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`8.
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`The Commission brings this action pursuant to the authority conferred upon it by
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`Sections 21(d) and 21A of the Exchange Act [15 U.S.C. §§ 78u(d), 78u-1(a)].
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`9.
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`The Commission seeks a final judgment: (a) permanently enjoining Defendants from
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`violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, pursuant to Section 21(d)
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`of the Exchange Act [15 U.S.C. § 78u(d)]; (b) ordering Defendants to disgorge their ill-gotten gains
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`with prejudgment interest thereon, pursuant to Sections 21(d)(5) and 21(d)(7) of the Exchange Act
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`[15 U.S.C. §§ 78u(d)(5), 78u(d)(7)]; (c) ordering Defendants to pay civil money penalties pursuant to
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`Section 21A of the Exchange Act [15 U.S.C. § 78u-1]; and (d) permanently prohibiting Watson from
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`serving as an officer or director of any company that has a class of securities registered under
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`Exchange Act Section 12 [15 U.S.C. § 78l] or that is required to file reports under Exchange Act
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`Section 15(d) [15 U.S.C. § 78o(d)], pursuant to Exchange Act Section 21(d)(2) [15 U.S.C.
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`§ 78u(d)(2)]; and (e) ordering any other and further relief the Court may deem just and proper.
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`JURISDICTION AND VENUE
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`10.
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`This Court has jurisdiction over this action pursuant to Section 27 of the Exchange
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`Act [15 U.S.C. § 78aa].
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`11.
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`Defendants, directly and indirectly, have made use of the means or instrumentalities
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`of interstate commerce or of the mails in connection with the transactions, acts, practices, and
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`courses of business alleged herein.
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`12.
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`Venue lies in this District under Section 27 of the Exchange Act [15 U.S.C. § 78aa].
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`Certain of the acts, practices, transactions, and courses of business alleged in this Complaint
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`occurred within this District, including that at all relevant times, LTEA shares traded on NASDAQ,
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`which is located in New York, New York.
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 4 of 19
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`DEFENDANTS
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`13. Watson, age 60, is a New Zealand citizen and believed to be a resident of London,
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`United Kingdom. Watson has never been registered with the Commission and holds no securities
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`licenses. At all relevant times, Watson controlled over 30% of the shares of LTEA, personally and
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`through companies he controlled.
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`14.
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`In 2001, the Commission issued settled administrative proceedings against Watson
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`for violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder in connection with his
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`insider trading in McCollam Printers, Ltd., a publicly traded New Zealand-based issuer.1
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`15.
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`Lindsay, age 44, is a Canadian citizen and resident of Vancouver, British Columbia,
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`Canada. Lindsay has never been registered with the Commission and he holds no U.S. securities
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`licenses. At all relevant times, Lindsay was the principal of CMGT Capital Management, a Cayman
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`Islands-exempt broker-dealer registered with the Cayman Islands Monetary Authority.
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`16. On July 16, 2018, Lindsay was charged, along with Giguiere, by the Commission
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`with violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder for his role in a
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`manipulative trading scheme.2 See SEC v. Giguiere, et al., No. 18-cv-01530 (S.D. Cal.) (“SEC v.
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`Giguiere”). At the same time, Lindsay was criminally charged for the same conduct. See United States
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`v. Giguiere, et al., No. 18-cr-03071 (S.D. Cal.) (“U.S. v. Giguiere”). On July 23, 2019, Lindsay pleaded
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`guilty to one count of conspiracy to commit securities fraud. Both cases are currently pending in the
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`United States District Court for the Southern District of California.
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`1 See Order Instituting Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings,
`and Imposing a Cease-and-Desist Order, Securities Exchange Act of 1934 Release No. 44934 (Oct. 15, 2001), available
`at https://www.sec.gov/litigation/admin/34-44934.htm.
`2 Penny stocks, also known as “microcaps,” are not listed on a national securities exchange such as NASDAQ; they
`instead trade over the counter at prices below $5 and are typically issued by companies with little to no revenue or assets.
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 5 of 19
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`17.
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`Giguiere, age 47, resides in Newport Coast, California. Giguiere has never been
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`registered with the Commission and he holds no securities licenses. At all relevant times, Giguiere
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`owned and operated TheMoneyStreet.com (“TMS”), a stock promotion website.
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`18. On July 16, 2018, Giguiere was charged, along with Lindsay, by the Commission
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`with violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder for his role in two
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`fraudulent schemes. See SEC v. Giguiere. At the same time, he was charged criminally for the same
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`conduct. See U.S. v. Giguiere. On August 1, 2019, Giguiere pleaded guilty to one count of conspiracy
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`to commit securities fraud. Both cases are currently pending in the United States District Court for
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`the Southern District of California.
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`OTHER RELEVANT INDIVIDUALS AND ENTITIES
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`19.
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`LTEA is a Delaware corporation with a principal place of business in Farmingdale,
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`New York. Until the Commission revoked its registration on February 19, 2021, LTEA was a
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`reporting company with a class of securities registered under Section 12(g) of the Exchange Act.3
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`LTEA’s common stock traded on NASDAQ from approximately July 2016 to April 2018, when
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`NASDAQ delisted LTEA for making “a series of public statements designed to mislead investors
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`and to take advantage of the general investor interest in bitcoin and blockchain technology.”
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`20.
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`Company A is a New Zealand company with a principal place of business in
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`London, England. In late 2017, according to materials prepared by Company A, it was “a holding
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`company with interests in various financial services” including a foreign exchange brokerage, and it
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`was purportedly “developing proprietary Blockchain technology” and “developing . . . a Blockchain
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`enabled platform.”
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`3 See Order Instituting Proceedings Pursuant to Section 12(j) of the Securities Exchange Act of 1934, Making Findings,
`and Revoking Registration of Securities, Exchange Act Release No. 91174 (Feb. 19, 2021), available at
`https://www.sec.gov/litigation/admin/2021/34-91174.pdf.
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 6 of 19
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`21.
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`Individual A, age 55, resides in Carmel, California. At all relevant times, he was a
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`microcap stock promoter who participated and, while acting as a confidential source to law
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`enforcement, purported to participate in stock promotion schemes with Lindsay and Giguiere.
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`22.
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`Individual B, age 25, resides in New York, New York. He is Watson’s son.
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`Individual B has never been registered with the Commission and holds no securities licenses. At all
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`relevant times, he was a consultant for Company A.
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`FACTS
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`I.
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`DEFENDANTS’ RELATIONSHIP PRIOR TO THE ANNOUNCEMENT
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`23.
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`Prior to, and concurrent with, the insider trading scheme alleged herein, Giguiere and
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`Lindsay engaged in other fraudulent schemes together.
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`24.
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`As alleged in the Commission’s complaint in SEC v. Giguiere, Giguiere and Lindsay
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`engaged together in “pump-and-dump” schemes to defraud investors in microcap securities.
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`25.
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`Specifically, in the fall of 2017, Giguiere and Lindsay received shares of Kelvin
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`Medical, Inc. (“KVMD”), engaged in matched trades to increase the price of KVMD shares from
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`$0.00 to $1.37, and caused KVMD to issue press releases in order to further increase the price of
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`shares, intending to quickly sell their shares into the market.
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`26.
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`In and around 2017, Lindsay’s business model included organizing shell companies,
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`finding suitable public companies for reverse mergers, executing reverse mergers with the shell
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`companies, providing financing, and working with management on corporate development and
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`news releases and other promotional efforts.
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`27.
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`Lindsay coordinated the new company’s press releases and, at the same time,
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`accumulated the company’s stock and arranged for stock promotion. Through this process, Lindsay
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`profited from the sale of stock, frequently at the expense of unsuspecting retail investors.
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 7 of 19
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`28.
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`Lindsay traveled frequently to manage and grow relationships in connection with
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`these efforts.
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`29.
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`At all relevant times, Watson was a friend and business associate, and also a
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`brokerage client, of Lindsay’s.
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`30.
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`In November 2017, shortly before the trading at issue here, Lindsay and Watson met
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`in Miami in person for dinner.
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`31.
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`32.
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`At around this time, Lindsay was an LTEA shareholder.
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`Throughout late 2017, Lindsay and Watson exchanged frequent messages and calls,
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`using an encrypted call and messaging application. Among other things, they discussed Watson’s
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`plans for LTEA; the possibility of Company A, a company to which Watson had several ties,
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`completing an initial public offering; and the promotion of another microcap issuer in which
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`Watson held a controlling interest.
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`33.
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`In or about September 2017, Watson sought to use Lindsay’s connections within the
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`microcap industry to promote LTEA.
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`34.
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` Shortly thereafter, Lindsay introduced Watson to Giguiere for the purpose of
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`promoting LTEA on TMS.
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`35.
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`Giguiere used the TMS website for stock promotion, including in connection with
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`“pump and dump” schemes.
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`36.
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`Giguiere agreed to promote LTEA through TMS but did very little promotion
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`because he was instructed to pause any promotional efforts during the period that LTEA was
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`considering and then preparing for its purported shift to blockchain technology.
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`37.
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`38.
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`Lindsay served as the conduit for communication between Watson and Giguiere.
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`Giguiere was aware of Watson’s and Lindsay’s relationship, and understood Watson
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`was an LTEA corporate insider. For example, on December 4, 2017, Lindsay told Giguiere, “Spoke
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 8 of 19
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`to Eric [Watson] this morning about canceling the spending on LTEA b/c company is in a quiet
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`period right now b/c of S-1. Eric [Watson] put the deal together; he’s a client of mine.”
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`39.
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`Lindsay, Giguiere, and Individual A exchanged numerous phone calls and text
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`messages during the period of October 2017 through December 2017. These three had a group text
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`thread on an encrypted messaging application, labeled “Daily Updates,” in which they discussed
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`their daily trading plans in various stocks. They also frequently discussed Lindsay’s conversations
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`with Watson regarding LTEA. They used the encrypted messaging application to conceal their
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`messages from governmental authorities.
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`II. WATSON PLANNED AND EXECUTED LTEA’S PURPORTED “PIVOT” TO
`BLOCKCHAIN
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`40.
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`LTEA was formed in May 2015 through a merger between Long Island Brand
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`
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`Beverages and Cullen Agricultural Corp., a company owned and controlled by Watson.
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`41.
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`Prior to the Announcement, LTEA was principally engaged in the production and
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`distribution of premium, non-alcoholic, ready-to-drink beverages.
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`42.
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`43.
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`In September 2017, Watson controlled more than 30% of LTEA’s common stock.
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`At that time, Watson suggested to the Chairman of LTEA’s Board of Directors that
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`the company shift its business from soft drink production to any of a number of possible other
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`businesses, including blockchain-related ventures.
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`44. Watson continued his pitch and, by December 2017, he had convinced the company
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`to “pivot” from soft drink manufacture to blockchain-related business.
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`45. On December 4, 2017, LTEA met with Company A, which, according to Watson,
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`was seeking to enter the blockchain space. Watson introduced Company A to LTEA.
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`46. Watson had a number of ties to Company A at this time. Company A had been
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`incorporated in New Zealand by a friend of Watson a few months earlier, and Individual B,
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`Watson’s son, was a consultant for Company A.
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 9 of 19
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`47. On December 5, 2017, Company A and LTEA entered into a confidentiality
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`agreement. This agreement included a provision forbidding Company A from disclosing any
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`confidential information without the written consent of LTEA and forbidding Company A from
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`engaging in securities transactions involving the securities of LTEA while in possession of
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`confidential information. As of at least December 9, 2017, Watson was aware of the existence of
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`this agreement between Company A and LTEA.
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`48.
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`On December 7, 2017, Individual B sent a written proposal outlining the steps
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`LTEA should take to “[r]efocus . . . in the blockchain technology/digital asset markets” to two
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`LTEA board members, Watson, and others.
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`49.
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`On the same day, LTEA purchased the domain name www.longblockchain.com.
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`50. On December 11, 2017, LTEA entered into a consulting agreement with an
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`individual to assist in evaluating blockchain opportunities.
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`51. On December 18, 2017, LTEA and Watson entered into a Confidentiality
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`Agreement governing Watson’s treatment of LTEA’s confidential information, including “all
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`information whether of a technical, business or other nature . . . that is or may be disclosed” by
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`LTEA to Watson, including “all information concerning . . . product launches or offerings.” Per
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`this Confidentiality Agreement, Watson was prohibited from disclosing any of LTEA’s information
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`without LTEA’s prior written consent. He was further prohibited from engaging in “any transaction
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`involving the securities of [LTEA] while in possession of any Confidential Information.”
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`52. On December 19, 2017, Watson and Individual B, Watson’s son, met with LTEA to
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`discuss Individual B’s purported expertise in blockchain. On the same day, LTEA’s Board of
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`Directors approved changing the company’s name to Long Blockchain Corp.
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`53. On December 21, 2017, LTEA issued the Announcement, calling its shift to
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`blockchain technology a “once-in-a-generation opportunity.”
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 10 of 19
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`III. WATSON OWED A DUTY TO LTEA AND ITS SHAREHOLDERS TO
`REFRAIN FROM USING LTEA’S INFORMATION FOR HIS PERSONAL
`BENEFIT
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`54.
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`As a corporate insider and the controlling shareholder of LTEA, Watson had a
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`
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`fiduciary and other relationship of trust and confidence with LTEA and its shareholders that
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`obligated him not to disclose or trade on LTEA’s information for his personal benefit.
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`55.
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`In addition, Watson had a duty of trust and confidence not to disclose or trade on
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`LTEA’s information for his personal benefit based on his Confidentiality Agreement with LTEA,
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`which forbade him from disclosing any of LTEA’s confidential information without LTEA’s prior
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`written consent and from engaging in transactions involving LTEA’s securities when in possession
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`of LTEA’s confidential information.
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`IV. WATSON TIPPED LINDSAY WITH MATERIAL NONPUBLIC
`INFORMATION REGARDING THE IMPENDING ANNOUNCEMENT, AND
`LINDSAY CONVEYED THIS INFORMATION TO GIGUIERE PRIOR TO THE
`ANNOUNCEMENT
`
`56.
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`Throughout the events leading up to the Announcement, Defendants continuously
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`
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`communicated about LTEA and its business prospects, including Watson’s ongoing and ultimately
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`successful efforts to convince LTEA’s management to shift its business from soft drink
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`manufacturing to blockchain technology.
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`57. On December 4, 2017, the same day that LTEA met with Company A, the New
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`Zealand company purportedly seeking to enter the blockchain space, Lindsay told Giguiere and
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`Individual A that he had been “trying to reach the guy behind the deal on Long Island Iced Tea all
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`weekend, and he finally called me back this morning.” Lindsay later specified that the individual he
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`spoke to that morning who was the source of Lindsay’s information about LTEA was “Eric”
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`[Watson], and again described Watson as “the guy who put the deal together.”
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`58. On the same day, Lindsay told Giguiere and Individual A that Watson told Lindsay
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`that “[t]hey may announce an agreement with a blockchain deal.” Lindsay, Giguiere, and Individual
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 11 of 19
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`A further discussed that, in light of this possible impending announcement, any “spend” on TMS’s
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`promotion of LTEA should be paused.
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`59.
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`On December 5, 2017, Lindsay called Individual A and informed him that LTEA
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`planned to go through with the blockchain deal and planned to make an announcement to that
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`effect the following week. Individual A told Lindsay that he would tell Giguiere that LTEA had
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`decided to pursue the deal.
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`60.
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`Later that day, Individual A sent a message to Giguiere using an encrypted messaging
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`application, copying Lindsay, and stating: “LTEA is going to move fed [sic] with block chain deal.”
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`61.
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`The next day, Lindsay, Giguiere, and Individual A chatted via an encrypted
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`messaging application about LTEA’s strategy and focus on blockchain.
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`62. On December 7, 2017, the same day that LTEA purchased a domain name reflecting
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`its planned name change to “Long Blockchain Corp.,” Lindsay sent to Giguiere, via encrypted email,
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`a PowerPoint presentation regarding Company A.
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`63.
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`On December 11, 2017, the same day that LTEA entered into a consulting
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`agreement to evaluate blockchain opportunities, Lindsay called Individual A and reported that
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`Lindsay had spoken to Watson that day and requested an LTEA shareholder list, that Lindsay was
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`considering “buy[ing] some more stock while it’s down here, while were are waiting for this other
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`stuff to materialize,” and that Watson was continuing to work with the company to get the
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`blockchain deal to “materialize.”
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`64.
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`Lindsay explained to Individual A that he had requested the LTEA shareholder list
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`because it would prove Watson had control over the LTEA, which would make Lindsay more
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`confident about the merits of purchasing additional LTEA shares. Later in the call, Lindsay
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`confirmed that he had received the shareholder list from Watson.
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 12 of 19
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`65. On December 16, 2017, Watson sent Lindsay a slide deck called “[Company A]
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`Blockchain Strategy Deck [Initials of Individual B]” via an encrypted messaging application. Lindsay
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`forwarded this slide deck to an acquaintance who was a microcap stock promoter unaffiliated with
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`Giguiere or TMS.
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`66.
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`The following day, Watson messaged Lindsay, expressing his confidence that LTEA
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`was going forward with his proposed “pivot” to blockchain technology, stating that “Tea WILL be
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`BC.”
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`67. On December 18, 2017, Watson entered into the Confidentiality Agreement, which,
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`among other things, prohibited him from sharing any information he acquired from LTEA without
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`LTEA’s prior written consent. Watson never received any written consent from LTEA to share its
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`information with Lindsay.
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`68.
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`Starting the next day, December 19, 2017, Watson began sharing various drafts of
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`the Announcement with Lindsay.
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`69.
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`At approximately 8:00 p.m. on December 19, 2017, Watson sent to Lindsay via
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`encrypted messaging application a draft of the Announcement entitled (with brackets in original),
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`“Long Island Iced Tea Corp. Changing Name to [Long BlockChain Corp.], Shifts Strategic
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`Direction Towards Opportunities in Blockchain Technologies.” This draft Announcement
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`explained that that “[t]he primary focus of the Company will now be the exploration of and
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`investment into opportunities that leverage the benefits of blockchain technology.”
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`70.
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`Just before midnight on December 19, 2017, Watson sent to Lindsay, via encrypted
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`messaging application, a revised draft version of the Announcement. A few hours later, Lindsay
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`forwarded, via encrypted messaging application, this draft version to a colleague with whom he
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`worked.
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 13 of 19
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`71. On the morning of the following day, December 20, 2017, Individual B, Watson’s
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`son, sent the final draft version of the Announcement to Watson. This version of the
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`Announcement was the one ultimately issued the next day.
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`72. Watson thereafter sent the final version of the Announcement to Lindsay via
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`encrypted messaging application, and wrote “Smiling?”
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`73.
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`Lindsay replied to Watson: “Laughing . . . good job getting that done.” Watson then
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`replied: “When the market sees the [Company A] deal we may have a $50 stock.” LTEA’s closing
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`price on that day was $2.44.
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`74.
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`After receiving the final version of the Announcement from Watson on December
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`20, 2017, Lindsay sent it via encrypted messaging application to Giguiere and Individual A. By this
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`time, Lindsay had been telling Giguiere and Individual A for weeks that LTEA would announce its
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`“pivot” to the blockchain business and expected that the recipients of this material nonpublic
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`information would use it to trade with the expectation that the Announcement would cause a spike
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`in LTEA’s share price.
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`75. On the same day, Lindsay sent a message via encrypted messaging application to
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`approximately six individuals that “LTEA is coming back.”
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`76.
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`Giguiere read the Announcement he received from Lindsay, commenting to Lindsay
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`and Individual A that they would need to be “mindful” regarding TMS’s promotion of LTEA
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`because “the regulators are scrutinizing Block an[d] Crypto deals that are being promoted right
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`now.”
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`77.
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`Giguiere then asked Lindsay whether LTEA was making the Announcement that
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`day, and Lindsay replied: “Should be now . . . Or post market . . . I guess we will know shortly.” A
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`couple of hours later, Lindsay updated Giguiere on the timing of the Announcement, stating: “He’s
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`working on releasing . . . With legal.”
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`13
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 14 of 19
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`78. Within hours of receiving Lindsay’s message, Giguiere placed two market orders to
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`buy a total of 35,000 LTEA shares, which were executed at an average cost of $2.42 per share.
`
`V.
`
`LTEA MADE THE ANNOUNCEMENT AND GIGUIERE REAPED ILLEGAL
`PROFITS
`
`79. On December 21, 2017, at 8:32 am, LTEA issued the Announcement, stating that it
`
`was “shifting its primary corporate focus toward the exploration of and investment in opportunities
`
`that leverage the benefits of blockchain technology,” and that, in connection with this purported
`
`strategic shift, LTEA was changing its name to Long Blockchain Corp.
`
`80.
`
`As a result of the Announcement, LTEA’s trading volume and share price
`
`skyrocketed. LTEA’s trading volume that day was over 15 million shares, whereas its historical
`
`average volume was about 125,000 shares. LTEA’s closing price per share that day was $6.91, an
`
`increase of $4.47, or approximately 183%, from the previous day’s closing price of $2.44.
`
`81.
`
`Less than two hours after the Announcement, Giguiere sold the 35,000 shares of
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`LTEA he had purchased the previous day, realizing $162,500 in illicit profits. On the same day,
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`Lindsay’s business associate asked Lindsay via an encrypted chat message why Lindsay did not tell
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`him to buy LTEA prior to the Announcement. Lindsay replied: “I think I told everyone.”
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`VI. WATSON, LINDSAY, AND GIGUIERE VIOLATED THE FEDERAL
`SECURITIES LAWS
`
`
`
`A.
`
`
`82.
`
`THE INFORMATION REGARDING LTEA’S IMPENDING
`ANNOUNCEMENT WAS MATERIAL AND NONPUBLIC
`
`The information that Watson tipped Lindsay, and that Lindsay then shared with
`
`Giguiere, regarding LTEA’s impending Announcement was material because there is a substantial
`
`likelihood a reasonable investor would consider the information important in deciding whether to
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`purchase or sell LTEA securities.
`
`
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 15 of 19
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`83.
`
`The information that Watson tipped Lindsay, and that Lindsay then shared with
`
`Giguiere, regarding LTEA’s impending Announcement was nonpublic because, prior to the
`
`Announcement, it was not broadly disseminated generally to the investing public.
`
`84.
`
`That a reasonable investor would consider the information Watson tipped to be
`
`material—and that prior to the Announcement, the information was nonpublic—is demonstrated
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`by, among other things, the dramatic increase in LTEA’s trading volume and share price
`
`immediately following the Announcement.
`
`B.
`
`
`85.
`
`WATSON VIOLATED THE FEDERAL SECURITIES LAWS BY TIPPING
`LINDSAY WITH MATERIAL NONPUBLIC INFORMATION
`
`By tipping Lindsay with material nonpublic information regarding LTEA’s
`
`impending Announcement, Watson breached the duty he owed LTEA and its shareholders as a
`
`corporate insider and controlling shareholder and as a signatory to the Confidentiality Agreement.
`
`86. Watson obtained a personal benefit from tipping Lindsay, including a pecuniary gain
`
`or a reputational benefit that will translate into future earnings. For example, Lindsay had located
`
`and was liaising with a promotor for LTEA securities at Watson’s request. Watson also obtained a
`
`personal benefit by making a gift of confidential information to his friend Lindsay.
`
`87. Watson knew, consciously avoided knowing, or was reckless in not knowing that the
`
`information regarding LTEA’s impending Announcement that he tipped to Lindsay was material
`
`and nonpublic. Indeed, it was Watson who had such a powerful sway over LTEA that he was able
`
`to execute his plan to cause the company to change its entire business line from soft drink
`
`production to blockchain technology, and he appreciated the magnitude of such a change.
`
`88. Watson also knew, consciously avoided knowing, or was reckless in not knowing that
`
`trading in LTEA’s securities would result from his disclosure of information regarding LTEA’s
`
`impending Announcement.
`
`
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`15
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 16 of 19
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`C.
`
`89.
`
`
`
`LINDSAY VIOLATED THE FEDERAL SECURITIES LAWS BY
`SHARING THIS INFORMATION WITH GIGUIERE
`
`Lindsay knew, consciously avoided knowing, was reckless in not knowing, or should
`
`have known that the information had been divulged to him in breach of a duty of trust and
`
`confidence for personal benefit Lindsay was aware of Watson’s role at LTEA, and was of course
`
`aware of his business and social relationship with Watson. Lindsay’s communications with Giguiere
`
`also show Lindsay’s awareness of the information’s confidential nature.
`
`90.
`
`Lindsay disclosed information regarding LTEA’s impending Announcement to
`
`Giguiere, despite Lindsay knowing, consciously avoiding knowing, or being reckless in not knowing
`
`that this information was material and nonpublic. Lindsay’s communications with Watson and
`
`Giguiere show Lindsay’s awareness of the information’s sensitive nature.
`
`D.
`
`GIGUIERE VIOLATED THE FEDERAL SECURITIES LAWS BY
`TRADING ON THE BASIS OF MATERIAL NONPUBLIC
`INFORMATION
`
`91.
`
`Giguiere knew, consciously avoided knowing, was reckless in not knowing, or should
`
`
`
`have known that the information he received had been divulged in breach of a duty of trust and
`
`confidence for personal benefit. Giguiere understood from Lindsay that the identity of the source
`
`of the information was Watson, that Watson was an LTEA corporate insider, and the nature of
`
`Lindsay’s and Watson’s professional and personal relationship. Indeed, Giguiere was aware that
`
`Watson and Lindsay were business associates, and specifically that Lindsay wanted to help Watson
`
`achieve pecuniary and reputational benefits through Giguiere’s help in promoting LTEA on TMS,
`
`Giguiere’s stock promotion website, and through Giguiere’s connections in the microcap industry.
`
`Giguiere also knew that Watson and Lindsay were friends.
`
`92.
`
`Giguiere traded on the basis of the information regarding LTEA’s impending
`
`Announcement, despite knowing, consciously avoiding knowing, or being reckless in not knowing
`
`that this information was material and nonpublic. Among other things, the size, nature, and timing
`
`
`
`16
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`Case 1:21-cv-05923-ALC Document 1 Filed 07/09/21 Page 17 of 19
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`of Giguiere’s purchases of LTEA’s shares after Lindsay disclosed to him information about the
`
`impending Announcement demonstrate Giguiere’s awareness of that information’s material and
`
`nonpublic nature.
`
`CLAIM FOR RELIEF
`Violations of Exchange Act Section 10(b) and Rule 10b-5 Thereunder
`(All Defendants)
`
`The Commission re-alleges and incorporates by reference here the allegations in
`
`93.
`
`paragraphs 1 through 92.
`
`94.
`
`Defendants, directly or indirectly, singly or in concert, in connection with the
`
`purchase or sale of securities and by the use of means or instrumentalities of interstate commerce, or
`
`the mails, or the facilities of a national securities exchan