A New York-based law firm says it has launched an investigation into whether Bitcoin miner Core Scientific and its management potentially engaged in “securities fraud and other illegal business practices” that led to the plunge in the price of its actions several times.
According to the securities class action firm Pomerantz LLP, the investigation was prompted by a Culper Research report in 2022, which alleged that Core Scientific had “wildly oversold” its mining and hosting businesses in 2021 and also waived a 180-day lock-up period on more than 282 million shares, making them “free to dump” in March 2022.
This report suggested that Core Scientific insiders had “abandoned any pretense of caring about minority shareholders,” noting that, following this news, Core Scientific’s share price fell 9.4% on March 3, 2022.
The law firm also highlighted another incident on September 28, 2022, in which the cryptocurrency lender Celsius Network filed a motion in bankruptcy court, accusing Core Scientific of violating automatic stay provisions, adding improper surcharges and breaching contractual obligations.
This led to its share price falling 10.3% the day after, on September 29, 2022, it said.
In a final incident, the law firm said that on October 27, 2022, Core Scientific announced that “given the uncertainty regarding the Company’s financial condition, there is substantial doubt about the Company’s ability to continue,” revealing that he only owned 24 Bitcoin (BTC) compared to 1,051 BTC on September 30.
This news sent Core Scientific’s share price falling sharply, closing at $0.22 per share, down 78.1%, the firm said.
Pomerantz LLP said it was investigating these claims on behalf of Core Scientific investors and has called for those investors to join the potential class action lawsuit.
The same law firm filed a class action lawsuit against Silvergate Capital on December 13 for making “materially false and/or misleading statements” and not reveal “material adverse facts about the company’s business, operations and prospects.”
On January 4, Cointelegraph reported that Core Scientific had agreed to shut down 37,000 mining rigs it hosted for Celsius because the bankrupt cryptocurrency lender had failed to pay its electricity bills. According to the Bitcoin miner, this played a significant role in the liquidity problems that led to his Chapter 11 bankruptcy filing on December 21.
On Dec. 23, Cointelegraph reported that a United States bankruptcy court had granted Core Scientific provisional approval to access a USD 37.5 million loan from existing creditors to finance its liquidity problems.
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