Argo Blockchain Facing a Class Action Suit Alleging Nondisclosure in U.S. Share Sale
Argo Blockchain is facing a lawsuit alleging nondisclosure of material risk comprising capital constraints, rising electricity, and network challenges.
The crypto mining firm with a duo listing on the Nasdaq exchange as ARBK and ARB on the London Stock Exchange is embroiled in a class action suit citing misstatement of the actual position.
Misleading Financial Position
The suit alleges the crypto miner misled investors on the risk levels and going concern during its initial public offering (IPO). The plaintiffs submitted that Argo Blockchain intentionally misled investors of its sound business when offering its American depositary shares (ADS) in 2021.
The plaintiffs’ attorney demonstrated that the London-headquartered firm conveyed an untrue position by making incomplete statements. The attorneys added that Argo omitted critical facts that would have prompted potential investors to reconsider their ADS purchase decision.
The documents annexed to the January 26 filing revealed to the District Court judge for the Eastern District of New York that the inclusion of rising electricity charges, network challenges, and capital inadequacy would have averted the misleading aspect of the statement.
Nondisclosure of Constraints
The plaintiffs accuse Argo of aiding erroneous investment decisions by concealing that it battled capital constraints, the spike in electricity charges, and network-related disruptions.
The plaintiffs argue that the nondisclosure of the constraints amounted to misleading information about the mining capacity of its Helios facility in Texas. The petition submitted illustrates that Argo overstated the business prospects despite the management’s awareness that the constraints would hamper the firm’s capability to mine bitcoin and run the Helios facility.
The filing alleges that Argo could have portrayed the actual position of the mining business as less sustainable than what it led potential investors to believe. Consequently, the plaintiffs hold that Argo overstated its financial prospects.
The lawsuit relates to the bitcoin miner offering 7.5M ADS, each carrying an equivalent of 10 common stocks. The plaintiffs accuse Argo of overstating its business prospects in September 2021 to lure investors to the ADS offered on the Nasdaq Global Market.
Troubled Crypto Mining Segment
Three months later, Argo would suffer the unforgiving squeeze of 2022 that brought down crypto mining firms. Plummeting crypto valuations and higher electricity costs would characterize the mining segment in 2022.
The declining Bitcoin price would force the miners to dispose of their holdings to avoid bankruptcy. Unfortunately, Core Scientific would face bankruptcy wrath.
Argo Blockchain would avoid suffering the same fate by disposing of its Helios facility for $65 million to Galaxy Digital. It would also receive a $35 million loan from the financial-services firm.
The sale of the Texas-based mining facility lifted the miner’s shares price, which slid by 90%. Today, Argo stock price has regained above the mandatory $1 to exchange at $1.95 on the Nasdaq pre-market trading.
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