Nasdaq accuses Long Blockchain of misleading investors

Long Blockchain, the iced tea maker that last year changed its focus to blockchain, has been accused by Nasdaq of misleading investors.

The New York exchanges operator sent a letter to Long Blockchain last week, indicating that it plans to use its “discretionary authority” to delist the company, according to a filing Long Blockchain made on Thursday with US securities regulators.

Nasdaq staff “believed that the company made a series of public statements designed to mislead investors and to take advantage of general investor interest in bitcoin and blockchain technology, thereby raising concerns about the company’s suitability for exchange listing,” according to the filing.

Long Blockchain, which last December changed its name from Long Island Iced Tea Corp, said in the filing with the Securities and Exchange Commission that it “strongly disagrees” with Nasdaq’s decision. It has filed an appeal with Nasdaq, meaning it will continue trading on the Nasdaq market.

A Nasdaq spokesperson did not immediately return a Financial Times request for comment.

In October 2017, before Long Island Iced Tea changed its name and business strategy, it said it received a warning from Nasdaq that since its market value was below $35m for 30 straight working days, it was at risk of being delisted. Nasdaq had given it until April 2018 to remedy the situation.

Its market value did not retake the $35m mark until December, when its decision to convert to Long Blockchain sent its market value shooting in the course of a single day from $22.3m to $63.2m, according to FactSet data. Since that time, it has fallen back to just under $30m.

Long Blockchain’s first public foray into the sector came on January 5, when it issued a press release indicating it had reached a pact to acquire 1,000 bitcoin mining machines that were to be shipped to “a secure data centre in the Nordic region to immediately commence mining operations.”

“We view this transaction as an important and validating initial step in the company’s progression into blockchain technology,” said Philip Thomas, who was then Long Blockchain’s chief executive. “The commencement of our mining operations places us on a path to generating blockchain-related revenue through the accumulation of bitcoin.”

A week and a half later, Long Blockchain appeared to deepen its blockchain ties by saying it had signed a letter-of-intent to merge with the UK’s Stater Blockchain in what Mr Thomas described as a “potential milestone.”

However, by February 2, Long Blockchain hit a stumbling block: it decided it would not buy the 1,000 bitcoin mining rigs after all. It said that after “thoughtful consideration and in consultation with outside technology advisers, the company will instead focus its efforts on seeking to enter into and ultimately consummate its previously announced proposed merger with Stater Blockchain.”

Long Blockchain could not be reached for comment on the status of the negotiations. Stater Blockchain did not immediately respond to a request for comment.

This week, the story took another twist. The group said Mr Thomas “terminated his employment agreement”. Shamyl Malik, who says he has held senior roles at Morgan Stanley and Citigroup, has taken the reins as CEO.

Long Blockchain’s board has also approved a spin-off of Long Island Brand Beverages, its drinks subsidiary, to “allow the company to focus exclusively on its move into the blockchain technology industry.”

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