FEBRUARY 2018 • LONGISLANDPRESS.COM 27
Cryptocurrency makes a home
By WARREN STRUGATCH
The most important economic story
of this century will likely be the
rise of cryptocurrency, the digital
open ledger exchange system where
users, rather than government
treasury officials or bankers,
determine value and collectively
maintain system integrity. Recent
developments, including a Long
Island beverage company’s
announcement that it would
become a blockchain miner, have
roiled the market, which tanked
early this month. Network pundits,
TV financial gurus, big banks
and government officials have
increasingly raised questions about
the dangers of cryptocurrency.
For a few days around Christmas,
a struggling Farmingdale beverage
manufacturer named Long Island
Iced Tea Corp. seized national
attention when it changed its name
to Long Blockchain Corp. and saw
its stock value nearly triple before
sinking back to earth.
It was apparently too much for
CNN. Declaring “Bitcoin Mania
Has Reached a New Level of
Insanity,” Money writer Paul
R. La Monica compared “the
hype surrounding bitcoin and
blockchain” with the dotcom boom
and bust of the late ’90s.
“Madness,” he railed. “Pure and
simple. Long Island Iced Tea is just
the latest small company to change
its business model in an attempt
to latch onto the ... cryptocurrency
wave.” The New York Times labeled
the move “the most notorious
example” of struggling companies
who slap “blockchain” to their
names and announce improbable
cryptocurrency plans.
The actual story is more
complicated. It’s also a little
juicier. Involved are such names
as Jonathan Ledecky, the New
York Islanders principal owner;
Heidi Klum, the supermodel;
Eric Watson, a polo-playing New
Zealand playboy rancher; and
Kerry Kennedy, one of the late
Robert F. Kennedy’s daughters and
ex-wife of Gov. Andrew Cuomo.
Long Island Iced Tea’s
transformation from beverage
company to bitcoin miner began last
October. Having reported latestquarter
sales of just $1.6 million,
the company’s stock had dropped
more than 40 percent, dragging
valuation below $35 million. The
drop precipitated a Nasdaq delisting
warning. As the cash-strapped
drink maker had funded operations
primarily through equity sales and
borrowing, the warning was heeded.
Philip Thomas, the company’s
hitherto low-profile CEO, decided to
raise revenues by going blockchain.
The odd saga began in October 2007
when Mr. Ledecky and Mr. Watson,
his business partner, raised $550
million in an initial public offering
for a financial shell company,
Triplecrown Acquisition Corp. The
shell then acquired Mr. Watson’s
New Zealand dairy farm business,
CullenAgricultural Technologies,
taking that company
public. Six years later the
partners acquired Mr.
Thomas’s Long Island
Brand Beverages. At this point they
changed the company name to Long
Island Iced Tea.
Mr. Watson, who’s reported to have
a fondness for dating supermodels
and throwing extravagant parties,
also runs Cullen Investments. As
Bloomberg Business News reported,
Cullen is a majority shareholder
in Bendon Ltd., a lingerie and
swimwear company which employs
Heidi Klum as spokesmodel. As
for Kerry Kennedy, Bloomberg
reported she was a board member
of Long Island Iced Tea before
resigning in September.
While bitcoin transactions remain
unfamiliar processes for most
Long Islanders, a number
of e-retailers around the
world have been accepting
cryptocurrency for years.
One is Tyler Roye, a
veteran Long Island tech
entrepreneur and co-founder/
CEO of eGifter, an online
gift-card market that began
accepting bitcoin in 2014.
While opponents raise
fears that cryptocurrency
transactions are vulnerable
to hackers, their advocates insist
the opposite is true. Mr. Roye made
the cryptocurrency case in an
August blog post:
“The low margins and fraud
challenges in our business had us
looking to add more affordable and
secure payment options,” he wrote.
“Bitcoin was a great addition as it
both reduced transaction costs and
delivered sales free of the type of
fraud we see in credit card sales.”
Cryptocurrency is not a perfect
system; neither is the government-
and banker-controlled system that’s
prevailed for centuries. What’s certain
is that cryptocurrency is not bound
by national borders, not restricted
by sovereign monetary policies and
defiantly not shackled to the demands
and fee structures of the banking
industry. Governments will likely
increase their efforts to regulate,
control and tax its usage, and bankers
will step up their efforts to maintain
their lucrative hold on the world’s
transactions. How successful they
will be depends largely on how vocal
we are today in support of economic
freedom of choice.
You can take that to the bank.
Warren Strugatch is a partner
at Inflection Point Associates, a
consulting firm in Stony Brook.
Reach him at Warren@
InflectionPointAssoc.com
on Long Island
PRESS BUSINESS
LI EYE
Long Island Iced Tea Corp. is banking on Bitcoin after changing its
name to Long Blockchain.
Would you trust this man with your
cryptocurrency? Philip Thomas
wants to turn Long Island Iced Tea
into a bitcoin miner.