Class Action Filed Against CEO, CFO of SupplyBit for Selling Securities Allegedly Disguised as Crypto ‘Mining Services Agreements’

News | May 21, 2024 By:

On Wednesday, May 8, 2024, Michael E. Gumprecht, LLC filed a class action lawsuit against Michael Groff and Wesley Decatur in the United States District Court for the District of Puerto Rico.

The lawsuit alleges that Groff, the founder and CEO of SupplyBit, and Decatur, the CFO, violated Illinois state securities laws by selling unregistered securities disguised as mining services agreements for the cryptocurrency bitcoin. SupplyBit marketed these agreements, also called MSAs, as an easy way for people to profit from Bitcoin mining without the hassle of owning and operating their own mining machines.

However, the lawsuit claims the agreements were not truly connected to any actual mining operations and more closely resembled an investment contract. Under the agreements, investors like Gumprecht were promised a return based on the theoretical earnings of a certain amount of bitcoin mining power. But SupplyBit was not obligated to use the funds to mine Bitcoin or operate any specific equipment. The lawsuit argues this setup constitutes an investment of money in a common enterprise with the expectation of profits derived from the efforts of others, meeting the definition of an investment contract or security.

Further, the lawsuit states that during meetings with Gumprecht, Groff made misleading statements suggesting the funds would be used for active Bitcoin mining around the world. However, in March 2023, SupplyBit allegedly stopped making payments, claiming a force majeure related to issues with its bank, and has since held on to all the funds previously paid by investors.

The proposed class action seeks rescission of the MSAs under Illinois law, which allows unlawful securities transactions to be unwound. It aims to represent all individuals who entered into such agreements with SupplyBit. If certified, the suit could involve dozens or even thousands of alleged victims and seek refunds of the millions reportedly invested in total.

Please contact BlockTribune for access to a copy of this filing.