Several large companies are forcibly redirecting their brands onto Blockchain Boulevard, but not all stockholders are on board, which has spawned some blockchain class action lawsuits. In this post, we take a look at one of these blockchain re-brands, in particular: Riot Blockchain, a company currently wading through legal fallout after its metamorphosis from biotech to blockchain.
Blockchain Re-brands: From Beverages, Bras, and Biotech to Blockchain
Back in the day, Long Island Ice Tea peddled flavored beverages in bright packaging. These days, the company changed its name to Long Blockchain Corp. and concentrates on “exploration of and investment in opportunities that leverage the benefits of blockchain technology.”
Blockchain Re-brands: At First, Plaudits
Let’s get back to Bioptix — the brand transformer currently grappling with a blockchain class action.
When the company first announced its transition to token mining and acquisition, the market applauded. By the end of 2017, the company’s stock price had soared from $8 to $38. The future looked blockchain bright.
Blockchain Re-brands: The Fall
But the champagne toasts didn’t last long. Instead, the SEC came in hot with questions and concerns. Blockchain Riot’s stock price plummeted to about $10, which prompted some investors to pull the reins and prepare legal pitchforks.
And then news hit that John O’Rourke, one of the company’s head honchos, offloaded over 30,000 shares ($869,000) ten days after the stock hit its $46.80 zenith. (Denver Post)
But according to O’Rourke, it’s all a big misunderstanding. Tax and contractual purposes, he insists, were the impetus for his actions. “Basically, I sold less than 10 percent of my overall position. And I was doing it for tax obligations,” explained O’Rourke. “I could have sold more stock, but at the time, I sold what I needed,” he defended.
Blockchain Re-brands: The Class Actions
Soon after O’Rourke’s stock sales became public knowledge, litigation speculation tittered on the tongues of the commentator class.
Now, three different class actions are underway.
Did the company mislead investors about both O’Rourke’s moves and blockchain’s profit potential? That’s the class’ claim. Specifically, investors are concerned about “share-price manipulation through a dubious cryptocurrency pivot.” Additionally, shareholders seem anxious about executives’ ability to successfully transition the company. Were the principals deliberately hyperbolic about their understanding of the blockchain and crypto markets? According to the class, the plunging stock price raises the question.
“Riot lacked a meaningful business plan with respect to the cryptocurrency business and had only minimal investments in cryptocurrency products; the Company changed its name to Riot Blockchain, Inc. as part of a scheme to capitalize on public interest in cryptocurrency products, thereby driving up the Company’s stock price and enriching inside shareholders.”
Authorities Are Keeping A Sharp Eye On Businesses Doing A Blockchain Re-Brand
Riot Blockchain probably won’t be the only company weathering blockchain class actions. According to the Wall Street Journal, regulators are keeping a sharp eye on companies that“shift their business models to ‘capitalize on the perceived promise’ of the blockchain business.”
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The Gordon Law Group works with businesses and individuals on various cryptocurrency tax and blockchain business matters. Got a legal question or quandary involving a digital currency, smart contract, or other blockchain components? We can help. We also work with blockchain startups on compliance matters.
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