Eric Watson isolated in face of US claims

Co-defendant settles insidertrading case, clearing way for action against NZ businessman

Eric Watson’s cat-and-mouse game with the US Securities and Exchange Commission has edged further towards conclusion — and default judgment — as the last of the controversial New Zealand’s businessman’s co-defendants settled claims that they engaged in insider trading.

The Securities and Exchange Commission (SEC) claims, first filed in US courts in July 2021, concern Watson’s penny stock beverage maker Long Island Ice Tea’s bid to join the cryptocurrency bandwagon in 2017 by rebranding as Long Blockchain.

The change in direction, conducted at the peak of market frenzy over bitcoin, resulted in shares in the company nearly quadrupling in value.

Watson was charged with sharing information about the forthcoming rebrand, alongside his friend and broker Oliver Barrett-Lindsay, with Gannon Giguiere also looped in on the announcement.

Long Blockchain was subsequently delisted by the Nasdaq exchange after it was determined that the company had made a “series of public statements designed to mislead investors and to take advantage of the general investor interest in bitcoin and blockchain technology”.

Watson, for his part, in multiple interviews with the Herald has defended his conduct over Long Blockchain, denied insider trading and emphasised that he did not profit from any share trading around the crypto announcement.

He was not as open with the SEC as he was with newspapers, however, with the market regulator struggling to find Watson to serve him legal papers amid suggestions he was hiding in either the United Kingdom or Spain.

In 2022, the SEC convinced courts to allow him to be served in absentia — with Herald reports cited as evidence Watson was aware of the case — after advertising their claims in the international edition of the New York Times.

Filings in court for the SEC said the regulator — seeking financial penalties and to bar Watson from involvement in listed vehicles in the United States — would hold off seeking default judgement against him until his codefendants had been dealt with by the courts and the facts of the case were settled.

While Watson has not engaged with the proceedings, Lindsay settled in early 2022 — formally neither admitting nor denying the complaint, but agreeing to pay a yet-to-be determined penalty — while Giguiere initially elected to defend himself, with a weeklong trial tentatively set down for April.

Giguiere sought to dismiss the case, relying on arguments also used by Watson in interviews, claiming that the pair did not have a relationship and that Watson received no benefit. That motion to dismiss was denied in March.

And in a letter filed by the SEC to the court this month, it seems that Giguiere has also elected to settle.

“Last week, SEC counsel and Giguiere reached a settlement, which, if authorised by the Commission and approved by this court, will resolve the SEC’s case against Giguiere,” the filings said.

Settlement is expected to be formalised in December, clearing the way for default judgment against Watson.

Watson did not respond to Weekend Herald requests for comment this week.

This latest court setback represents a further worsening of Watson’s position as he faces legal war on multiple fronts.

The collapse of his New Zealand-based Cullen Group in 2019 — following a ruling that it owed $112m over tax avoidance — has seen nearly two dozen of his companies placed in administration.

Despite a long-running circus where New Zealand liquidators claimed Watson was hiding from document-servers, liquidators this year signalled an intent to bankrupt him after securing a $57m summary judgment in absentia against him personally.

And a titanic struggle with his former business partner Sir Owen Glenn — waged in international courts for more than a decade — that has burnt tens of millions in legal bills on both sides, has seen Glenn use court awards in his favour to chase Watson personally around the globe, and his family members in New Zealand and in the United States, seeking $82m.

In late 2020, lawyers acting for Glenn managed to have Watson thrown in prison — a rare outcome in a civil case — for contempt of court after finding that he had hidden assets in a “rainy day account” in his mother’s name.

As a result, Watson served four months in London’s Pentonville prison.