SEC Wins Motion to Dismiss Watson’s Counterclaim in Long Blockchain Corp. Insider Trading Case
On Monday, June 30, 2025, the United States District Court for the Southern District of New York denied Eric J. Watson’s motion to dismiss a complaint filed by the Securities and Exchange Commission (SEC) and granted the SEC’s motion to dismiss Watson’s amended counterclaim.
The ruling, issued by Judge Andrew L. Carter, Jr., addressed allegations of securities violations related to Watson’s actions as a corporate insider and controlling shareholder of Long Island Iced Tea Corp., later known as Long Blockchain Corp. (LTEA).
The SEC filed its complaint on July 9, 2021, alleging that Watson engaged in an insider trading scheme in late 2017. According to the SEC, Watson shared material nonpublic information about LTEA’s planned shift from soft drink manufacturing to blockchain technology with his business associate, Oliver-Barret Lindsay. Lindsay allegedly passed this information to Gannon Giguiere, a stock promoter who operated a website used to promote LTEA. The SEC claimed that Watson provided Lindsay with draft announcements about the pivot, which were not yet public.
On December 20, 2017, Giguiere purchased 35,000 LTEA shares at an average price of $2.42 per share. The following day, LTEA announced its blockchain pivot, causing its share price to surge to $6.91. Giguiere sold his shares shortly after, allegedly earning $162,500 in illicit profits. The SEC accused Watson of violating Section 10(b) of the Securities Exchange Act of 1934.
Watson, representing himself pro se, moved to dismiss the SEC’s complaint, arguing that the claims were unfounded and that he was not properly served. He also filed an amended counterclaim against the SEC, seeking dismissal for improper service and damages for reputational harm and losses, alleging due process violations, negligent investigation, abuse of process, and violations of the Federal Tort Claims Act. The SEC opposed Watson’s motion and moved to dismiss his counterclaim, citing Section 21(g) of the Exchange Act, which prohibits consolidating counterclaims in SEC enforcement actions without the agency’s consent.
The court’s opinion addressed both motions. Judge Carter denied Watson’s motion to dismiss, finding that the SEC’s complaint was sufficiently pleaded. The court had previously determined in a related motion by Giguiere that the SEC’s allegations of insider tipping were adequate.
Regarding Watson’s claim of improper service, the court noted that the SEC made multiple attempts to serve him, including through Spain’s Central Authority under the Hague Convention, after identifying a possible address in Ibiza, Spain. When those efforts failed, the court authorized service by publication in The International New York Times over four weeks in October and November 2022. The court ruled that these efforts met due process requirements, as service was reasonably calculated to notify Watson, who was deemed likely to read the publication due to his business background.
The court granted the SEC’s motion to dismiss Watson’s amended counterclaim, citing Section 21(g), which bars counterclaims in SEC enforcement actions without consent. The SEC did not consent to Watson’s counterclaim.
Watson argued that the SEC’s actions constituted selective enforcement and misconduct, but the court found no legal basis to allow the counterclaim, rejecting his reliance on a case he cited, SEC v. Sprecher, as it did not support his position.
The court concluded that the SEC’s complaint would proceed against Watson, while his counterclaim was dismissed with prejudice.
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