Once-surging crypto stocks run into trouble with Nasdaq

Long Blockchain and Longfin, two firms whose shares skyrocketed last year after they rebranded as blockchain businesses, have run into trouble with Nasdaq.

One was removed from the stock market effective Thursday and the other may meet the same fate, signaling the end of a brief era when everyone from soft-drink companies to cigar makers was cashing in on investors’ mania for cryptocurrencies and their underlying blockchain technology.

Long Blockchain was already facing potential delisting in December when it shifted its focus from iced tea to crypto.

The company said last week that it was being suspended by Nasdaq pursuant to a rule that gives the exchange operator the power to boot firms with histories of misconduct.

Shortly before that announcement, Longfin, the fintech-turned-crypto firm that’s in trouble with U.S. regulators, said it received a Nasdaq noncompliance letter because it didn’t file its quarterly report on time.

As bitcoin streaked toward a record high in December, a rash of firms that had little or no experience with cryptocurrencies or blockchain technology used the buzzwords as an antidote for lackluster stock returns.

Even Eastman Kodak shares, which have languished for years, skyrocketed after the photography pioneer said in January that it was joining with another firm to create a digital token called KodakCoin.

But the fun seems to be coming to an end for many of the stocks, which have lost steam in recent months amid a steep drop in the price of Bitcoin.

Share performance aside, Longfin and Long Blockchain have had a tough time proving themselves to investors and regulators.

Earlier this month, the U.S. Securities and Exchange Commission obtained a court order freezing more than $27 million in proceeds from the sale of Longfin shares, saying the gains came from illegal trades by insiders. (An attorney representing Longfin didn’t respond to a request for comment at the time.)

The agency had also been investigating the New York-based company’s acquisition of Ziddu.com, which Longfin has described as “a blockchain-empowered solutions provider that offers microfinance lending against collateralized warehouse receipts in the form of Ziddu Coins.”

That followed the firm’s ouster from the Russell 2000 Index less than two weeks after joining, and the resignation of its accountants, who said they found “material weaknesses” in the company’s financial reporting.

As for Long Blockchain, formerly Long Island Iced Tea, Nasdaq had threatened to delist it in October — before the name change — because its market value was too low.

In February, the exchange sent it a delisting notice, alleging that the Farmingdale, New York-based company “made a series of public statements designed to mislead investors and to take advantage of general investor interest in bitcoin and blockchain technology.”

The company said in a February filing that it “strongly disagrees” with Nasdaq’s assertion.

Long Blockchain’s stock is currently being traded over the counter.

Longfin said it intended to submit a plan of compliance to Nasdaq, which could convince the exchange to extend its filing deadline to July 9.

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