Crypto Mining Firm Hut 8 Shareholder Sues Directors Over Alleged Misleading Merger Disclosures

News | April 19, 2024 By:

On Friday, April 5, 2024, Jeffrey Thompson filed a verified shareholder derivative amended complaint in the United States District Court for the Southern District of New York against several directors and officers of Hut 8 Corp.

The complaint alleges that during the period between November 9, 2023 to January 18, 2024, the defendants breached their fiduciary duties and made misleading statements that failed to disclose important information regarding Hut 8’s merger with U.S. Data Mining Group, also known as USBTC.

Hut 8 is a company that operates computing infrastructure to mine bitcoin and provides services related to cloud computing, colocation, and high-performance computing. In late 2023, Hut 8 merged with USBTC in an all-stock deal. As part of the merger, USBTC’s main asset, a bitcoin mining facility joint venture located in Texas, became part of Hut 8.

However, the complaint alleges the merger was completed based on misstatements and material omissions. Specifically, the filing claims executives failed to disclose that one of USBTC’s largest shareholders was an undisclosed related party. It also says the Texas mining facility, a key USBTC asset, historically struggled to provide reliable energy and high-speed internet needed for bitcoin mining.

Interest expenses related to the facility were allegedly not properly reported, making it seem more profitable than it was. The complaint further states one individual familiar with USBTC said the company would have undergone a structured bankruptcy if not for the merger.

On January 18, 2024, an investment research firm published a report questioning details about the merger. In response, Hut 8’s stock price fell over 20% that day on heavy trading volume.

The plaintiff alleges the defendants’ actions subjected the company to securities fraud lawsuits and caused monetary losses. The complaint is seeking for the company to hold its directors and officers accountable for alleged breaches of fiduciary duties, unjust enrichment, and other claims.

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