Hut 8 Investor Sues Directors and Executives Over Alleged Misstatements in Crypto Mining Merger

News | June 20, 2024 By:

On Friday, June 7, 2024, Qian Wang filed a stockholder derivative lawsuit against certain current and former directors and officers of Hut 8 Corp.

The lawsuit, filed in the United States District Court for the Southern District of New York, alleges breaches of fiduciary duties by the defendants related to misleading statements made about a merger between Hut 8 and U.S. Bitcoin Corp that was completed in November 2023.

Hut 8 is a cryptocurrency mining company headquartered in Miami that operates computing infrastructure to mine bitcoin and provides cloud computing and data center services. In December 2022, U.S. Bitcoin Corp acquired a 50% stake in a bitcoin mining joint venture called King Mountain located in Texas. As part of the November 2023 merger between the two companies, King Mountain became part of Hut 8.

The plaintiff, who owns Hut 8 stock, claims the defendants failed to disclose important information about U.S. Bitcoin Corp and the King Mountain joint venture prior to the merger. Specifically, the suit alleges one of U.S. Bitcoin’s largest shareholders was an undisclosed related party. It also claims King Mountain historically struggled to provide adequate electricity and internet connectivity necessary for bitcoin mining. Proper accounting of interest expenses also allegedly made King Mountain appear more profitable than it was.

If the information had been known, the suit argues the merger would have posed more significant risks to Hut 8’s financial stability. In January 2024, a research report from J Capital was released that brought these issues to light, and Hut 8’s stock price dropped over 23% that day on high trading volume.

The lawsuit names 11 current and former directors and officers of Hut 8 as defendants. It accuses them of breaching their fiduciary duties and making false or misleading statements to investors about the company. Two executives are also accused of selling stock for a $2 million profit when the price was artificially inflated.

The plaintiff is seeking to recover damages for Hut 8 from the defendants that resulted from their alleged misconduct. If successful, it could provide compensation to the company and its shareholders.

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