Argo Blockchain caught up in lawsuit over allegations of misleading investors
Embattled Argo Blockchain (NASDAQ: ARBK ) has hit another snag following a new class action lawsuit filed by disgruntled investors against the mining company.
In the lawsuit, the plaintiffs allege that Argo misrepresented some facts regarding the company’s financial strength in its security offering to the public. In September 2021, Argo conducted an initial public offering (IPO) that raised $105 million, but investors now claim that the offering documents were “negligently prepared.”
“Argo was highly exposed to and/or suffered from significant capital constraints, electricity and other costs, and network difficulties,” the court document said. As a result, the plaintiffs allege that the firm’s ability to mine BTC, execute its business strategy and meet its obligations to investors was significantly reduced.
The plaintiffs further claimed that Argo’s “business and financial prospects were overstated” and as a result the company was in breach of its fiduciary duties. After the disclosure of the actual financial position of the company, the company’s shares fell from an initial listing price of $15 to $1.96 per share.
“Had [the investors] knew the truth, they would not have purchased or otherwise acquired said securities, or would not have purchased or otherwise acquired them at the high prices paid, the complaint states.
In June, Argo’s operational update blamed the decline in mining revenue on skyrocketing electricity costs and an increase in BTC mining difficulties. After months of swimming against the tide, Argo struck a deal to sell Helios, its flagship mining facility, to Galaxy Digital (NASDAQ: BRPHF ) for $65 million.
Three days before the class action, Argo won a small victory after it regained compliance with Nasdaq by maintaining its $1 minimum bid for 30 straight days.
Tough times for mining companies
Across the board, mining companies have been reeling under the weight of soaring energy costs and an uncertain regulatory climate. Canadian mining company Bitfarms (NASDAQ: BITF ) has been trying to keep its share price above the $1 mark or risk delisting on the Nasdaq.
Core Scientific (NASDAQ: CORZW ) announced its bankruptcy filing in December 2022, while other North American-based firms such as Greenidge Generation and Compute North are facing difficult situations.
Regulators worldwide are increasing energy costs and taxes for miners as law enforcement agencies crack down on unregistered virtual currency mining activities.
See: Blockchain Mining and Energy Innovation
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