Bitfarms Faces Class Action Lawsuit Over Alleged Financial Misstatements
On Friday, May 9, 2025, Bonito Olympio filed a class action complaint in the US District Court for the Eastern District of New York against Bitfarms Ltd., a Canadian Bitcoin mining company, and three of its executives: former CEO L. Geoffrey Morphy, current CEO Benjamin Gagnon, and Chief Financial Officer Jeffrey Lucas.
The lawsuit, filed on behalf of investors who purchased Bitfarms securities between March 21, 2023, and December 9, 2024, alleges violations of federal securities laws under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.
The complaint claims that Bitfarms and the named executives made false and misleading statements about the company’s financial reporting and internal controls during the specified period. According to the filing, Bitfarms operates data centers in Canada, the United States, Paraguay, and Argentina, where it mines Bitcoin and either holds it as a digital asset or sells it for U.S. dollars. The company’s financial strategy includes selling these digital assets, with proceeds recorded on its cash flow statements.
The lawsuit highlights two main issues. First, it alleges that Bitfarms incorrectly classified proceeds from Bitcoin sales as cash flow from operating activities rather than investing activities, misrepresenting its financial health. Second, it points to a material weakness in the company’s internal controls related to the accounting of warrants issued in 2021. These warrants, which allow holders to buy securities at a set price, were mistakenly classified as equity instruments instead of financial liabilities, which should have been accounted for at fair value.
In March 2024, Bitfarms acknowledged this internal control deficiency and outlined a remediation plan, stating it would expand its finance team with experienced accountants, involve legal counsel in complex financial agreements, and hire third-party consultants to review financial statements. The company repeatedly stated that this plan would be completed by the end of 2024. However, the complaint alleges that Bitfarms overstated its progress and ability to address the issue, as the remediation was later delayed to 2025.
On December 9, 2024, Bitfarms announced that its financial statements for 2022 and 2023, along with interim reports for 2023 and 2024, contained errors and would be restated. The restatement corrected the misclassification of Bitcoin sale proceeds and adjusted the accounting for the 2023 redemption of the 2021 warrants. Following this announcement, Bitfarms’ stock price dropped by $0.13 per share, or 6.07%, closing at $2.01 on December 10, 2024.
The lawsuit further notes that on April 1, 2025, Bitfarms filed its 2024 annual report with the U.S. Securities and Exchange Commission (SEC), confirming that the remediation of the internal control weakness would extend into 2025, contradicting earlier claims of completion in 2024.
The complaint seeks to represent a class of investors who purchased Bitfarms securities during the class period, asserting that the company’s securities traded on an efficient market on the Nasdaq Global Market under the ticker “BITF.” It claims that the defendants knowingly or recklessly issued false financial statements, which misled investors. The lawsuit also alleges that the individual defendants, as senior officers, had the authority to control the content of Bitfarms’ public filings and statements but failed to disclose critical adverse information.
The lawsuit requests class certification, damages for investors’ losses, prejudgment and post-judgment interest, and legal fees. It also demands a jury trial.
Please contact BlockTribune for access to a copy of this filing.
