Argo Blockchain Sued Over Misleading Statements
- Argo blockchain has also been sued over a violation of federal securities law during the IPO of its American depositary shares (ADS) in 2021.
- Investors in the company have accused it of making untrue statements and also omitting crucial details.
- The plantiff claims that the company omitted details about capital constraints, electricity, and other costs, along with its network difficulties.
- The company’s business was “less sustainable” than the investors were led to believe, reads the filing.
A rising number of crypto projects and companies were sued in 2022 by investors as well as regulatory authorities due to the promises that they were unable to keep amid a bearish crypto market. Interestingly, Argo Blockchain, a global data center business that provides a powerful and efficient platform for crypto mining operations, has also been sued over a violation of federal securities law during the initial public offering (IPO) of its American depositary shares (ADS) in 2021.
As per a filing in the United States District Court for the Eastern District of New York, investors in Argo Blockchain have accused the company of making untrue statements and also omitting crucial details related to its day-to-day operations like capital constraints, electricity, and other costs, along with its network difficulties.
A federal securities class action was filed on behalf of all the persons and entities that bought the ADSs or other securities related to the company between September 23, 2021, and October 10, 2022. The lawsuit stated that in late September 2021, the Argo Blockchain IPO took place, wherein the company issued 7.5 million ADSs at a price of $15 per unit, raking in a total of $105 million.
“The Offering Documents were negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading and were not prepared in accordance with the rules and regulations governing their preparation,” states the lawsuit.
The plaintiff also claims that Argo Blockchain failed to disclose during its IPO that it was facing capital constraints despite maintaining a fleet of thousands of Bitcoin (BTC) mining machines at facilities located in Canada and Dickens County, Texas. The document states that the company’s business was “less sustainable” than the investors were led to believe, while adding that the company overstated its capabilities.
Investors noted that Argo signed a non-binding letter of intent with an affiliate of New York Digital Investment Group (NYDIG) with the plan to sell 3,400 mining machines for cash proceeds of $6.5 million, resulting in a 23.26% drop in shares. Moreover, the company also mined 25% fewer BTC in May 2022 and its mining operations continued to take a hit in the same year.
“As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages,” the filing reads.
Furthermore, the crypto mining company previously announced that the price of both natural gas and electricity caused by the geopolitical situation in Europe and low levels of natural gas storage in the United States has significantly affected its output. Investors noted that Argo Blockchain failed to provide such information during the time of IPO.
The filing states that the company “had a duty to disseminate accurate and truthful information with respect to Argo’s financial condition and results of operations, and to correct promptly any public statements issued by Argo that had become materially false or misleading.”
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
