The Nasdaq-listed mining company Bit Digital is suspected of violating securities laws and could have misled investors about its activities. This was сообщила American law firm Hagens Berman.
“We are tallying investors’ losses and determining whether Bit Digital misled clients about its business model,” said Reid Kathrein, partner at Hagens Berman.
Earlier, the analytical firm J Capital Research published a report claiming that Bit Digital runs a “fake” crypto business, “intended to steal investors’ funds.”
At the end of the third quarter of 2020 Bit Digital reported using 22 869 ASIC miners in China. However, according to J Capital Research, the manufacturer’s statements were not accurate. The company contacted local authorities and could not confirm the stated number of devices.
It also emerged that none of the major manufacturers of Bitcoin mining equipment from China had heard of Bit Digital.
Analysts at J Capital Research allege that, under the guise of purchasing miners in the first nine months of 2020, Bit Digital stole $18.8 million.
Bit Digital (BTBT US) by ForkLog on Scribd
As of press time, representatives of Bit Digital had not commented on the allegations.
The news of potential securities-law violations pushed Bit Digital’s stock down 25.05% to $18.76. The company’s market capitalization fell to $901 million.
Source: Nasdaq.
According to an October report submitted to the U.S. Securities and Exchange Commission (SEC), in the first half of 2020 Bit Digital mined bitcoins worth more than $10 million.
Before fully switching to mining the first cryptocurrency in February 2020, the company was engaged in car rental in China and P2P lending.
According to J Capital Research, losses from Bit Digital’s P2P activities inflicted on Chinese investors amount to $42 million.
They also reported that since the summer of 2019, co-owner Liu Xiaohui and former CFO Len Jin have been arrested by Chinese police, and the former CEO Zeng Erxin is on the run.
“We believe that the key shareholders who controlled the company until the Chinese authorities shut down the P2P business still control it,” the analysts added.
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