Class-action lawsuit filed against Core Scientific

A shareholder of Core Scientific filed class-action lawsuit against the mining company for concealing adverse financial factors that led to investor losses.

The plaintiff Mei Pan alleges that from March 3 to October 28, 2022 the firm also made “false or misleading statements.”

According to the filing, on March 3 Culper Research published a report asserting that Core Scientific overstated its profitability and entered into a dispute with the hosting industry’s largest client — Gryphon Digital Mining. It emerged that the latter did not have enough funds to purchase the devices agreed to be hosted.

Core Scientific’s shares fell 9.4% that day, closing at $6.98.

On September 28 another client of the firm, Celsius, filed a petition in court. In bankruptcy proceedings the company alleged that Core Scientific violated the hosting agreement terms, delayed installation timelines, and charged unjustified markups to the payment.

Against this backdrop, the stock fell 10.3% to $1.30.

On October 27 the mining company said that by the end of the year it may exhaust its cash and equivalents. In Core did not rule out filing for bankruptcy protection to protect against creditors.

On that trading day the shares plunged 78.1% to $0.221, on “anomalously high” trading volume.

The plaintiff also noted that the company concealed from shareholders the expiration of the preferential electricity pricing agreement. As a result, tariffs rose more than double, increasing costs for self-mining.

Mei Pan is seeking recovery of the losses incurred, including interest adjudicated by the court, and reimbursement of “reasonable costs” of the proceedings.

All investors in the company in “similar circumstances” may join the claim, according to the filing.

The defendants in the case, alongside the company, include President and CEO Michael Levitt, former CFO Michael Tshupek (until April 4), and current CFO Denise Sterling.

As of this writing, Core Scientific’s Nasdaq shares were trading around $0.21. Since the session opened, the stock had fallen more than 8%.

As of October, the aggregate revenue of bitcoin miners rose only 7% to $589.7 million. In the previous month the figure fell by 19%.

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