The beleaguered Argo Blockchain (NASDAQ: ARBK) has hit another rough patch following a new class action lawsuit filed against mining companies by disgruntled investors.
In their lawsuit, the plaintiffs allege that Argo misrepresented several facts about the company’s financial strength when offering securities to the public. and raised $105 million, but investors now claim the offering documents were “negligently prepared.”
“Argo was highly susceptible to and/or suffered from significant capital constraints, power and other costs, and network issues,” the court filing read. As a result, the plaintiffs claim that the company’s ability to mine BTC, execute its business strategy, and meet its obligations to investors has been significantly reduced.
Plaintiffs further allege that Argo’s “business and financial prospects are exaggerated” and, as a result, the company has breached its fiduciary duty. When the company’s true financial situation became clear, the company’s stock price plummeted from its initial listing price of $15 to $1.96 per share.
“had [the investors] Had they known the truth, they would not have purchased or otherwise acquired the securities at the inflated price paid,” the complaint states. said.
In June, Argo’s operational update attributed the drop in mining revenue to rising electricity costs and rising BTC mining difficulty. After months of swimming against the tide, Argo has signed a deal to sell Helios, the company’s flagship mining facility, to Galaxy Digital (NASDAQ: BRPHF) for his $65 million.
Three days before the class action lawsuit, Argo scored a small win after regaining Nasdaq compliance by holding a $1 common stock minimum bid for 30 consecutive days.
Tough times for mining companies
Overall, mining companies are reeling under the weight of very high energy costs and an uncertain regulatory environment. Canadian block reward mining company Bitfarms (NASDAQ: BITF) is looking to keep its share price above $1 or risk delisting from the Nasdaq.
Core Scientific (NASDAQ: CORZW) announced it had filed for bankruptcy in December 2022, while other North American-based companies such as Greenidge Generation and Compute North faced their own rough patches. I’m here.
Regulators around the world are raising energy costs and taxes for miners, while law enforcement cracks down on unregistered crypto mining activity.
Watch: Blockchain Mining and Energy Innovations
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