Bit Digital, a Bitcoin mining company traded on the Nasdaq stock exchange, is the subject of a class-action lawsuit that alleges the company fabricated the extent of its Bitcoin (BTC) mining operations.
According to the lawsuit, which was filed in the Southern District of New York court on Wednesday by plaintiff Anthony Pauwels, Bit Digital misled investors and made materially false claims about the extent of its Bitcoin mining business, causing significant financial harm for investors.
Specifically, the plaintiff references an investigative report by J Capital Research that claims Bit Digital simply lied about having Bitcoin mining farms in operation across China. The firm’s website claims to have over 40,000 mining rigs currently in operation, exerting a hash rate of 2,253 petahashes per second, having successfully mined over 1,500 BTC since the beginning of 2020.
However, researchers at J Capital say they contacted government officials in the Chinese provinces in which Bit Digital claim to operate, only to find that no one had ever heard of them.
When J Capital’s research hit news headlines, Bit Digital’s stock price plummeted 25%. From BTBT’s peak valuation of $29.27 in early January, the stock price has since fallen 44% to the current valuation of around $16.
On Tuesday, Bit Digital issued a response to the claims made by J Capital, pointing out that the company had filed all of its documentation with the Securities and Exchange Commission and had always sought to update investors and regulators with accurate data.
However, the plaintiff in the lawsuit against Bit Digital says the firm’s executive leadership — CEO Min Hu and chief financial officer Erke Huang — were in a position to dictate the contents of any and all documents relating to the running of the business:
“Because of their positions with the Company, [Hu and Huang] possessed the power and authority to control the contents of the Company’s reports to the SEC, press releases and presentations to securities analysts, money and portfolio managers and institutional investors, i.e., the market.”
Pauwels seeks reparations for the 1,000 units of Bit Digital shares he purchased at a price of $21.81 each on Dec. 12, 2020, as well as other compensatory damages, court fees and expenses.
The plaintiff has demanded a trial by jury. No legal response has been made by Bit Digital at this time, nor did the company respond to Cointelegraph's request for comment.