Publicly traded crypto miner Bit Digital is the latest in the industry to get hit with a class-action lawsuit from investors. According to a recent filing with the Southern District Court of New York, the Nasdaq-listed company’s investors are suing for fraud.
No Chinese Presence
In their suit, Bit Digital’s investors allege that the mining company had made misleading comments in its filings, deliberately lying about the size of its mining capacity. Bit Digital had reportedly claimed to have 22,869 mining rigs in China, when in reality, its capacity was much lower.
The U.S.-based mining firm has been fighting reports of fraud for a while now. Earlier this month, investment firm J Capital Research reported that the company had been lying to investors, putting several of its claims into doubt.
The investment firm called Bit Digital’s assertion of owning almost 23,000 rigs in China “simply a lie,” adding that the mining firm was a “sham Bitcoin business.”
J Capital explained that its report included corroborated statements from local Chinese government officials, who testified that Bit Digital indeed didn’t have any Bitcoin miners in the country. This means that Bit Digital’s only available rigs are the 2,100 machines that the company operates out of its facilities in its Nebraska and Texas facilities.
Not one to back down, Bit Digital said in a recent statement that the report was filled with false accusations. The company reiterated figures from its financial disclosures in 2020’s third quarter, which showed its operations’ scale and size. It added that interested investors or investigators could go to check an overview of its mining operations on the Securities and Exchange Commission (SEC) ‘s website.
Halting Bit Digital’s Surge
Bit Digital enjoyed a pretty solid few months, which saw its stock jump by over 400 percent between December 28, 2020 and January 4, 2021, reaching a high of $32. J Capital published its report a week later, and its shares tumbled 35 percent and hit $16 once more. The company’s stock is now trading down 2 percent in the past 24 hours, signaling that the class-action suit could drag its share price in the mud even further.
The lawsuit will undoubtedly put a hold on Bit Digital’s plans to consolidate more mining power in 2021 – something that several of its competitors are now working on. In November, the company announced an asset-purchase agreement with non-U.S. investors that would see it issue 4,344,711 shares at $3.20 each in exchange for a combined 1 EH/s.
At the time, Bit Digital boasted that the agreement would help it to double its hashpower. The firm also announced that it would install 2,000 MicroBT Whatsminer M21 ASIC miners by the end of this month, adding a further 6.2PH/s to its hashrate.
With a combined 2.3EH/s, Bit Digital would have been able to rank beside some of the largest mining firms in North America – including the Marathon Holding Company and Riot Blockchain.