Bitcoin Miner Bit Digital Faces Class-Action Lawsuit for Alleged Fraud

Nasdaq-listed Bitcoin miner Bit Digital (Nasdaq: BTBT) is facing a class-action lawsuit in the United States as investors are blaming the company for making false and misleading statements.

First reported by Coindesk, the lawsuit was filed on Wednesday in the Southern District Court of New York, representing the investors who bought a stake in the mining company between December 21, 2020, and January 8, 2021.

Serious Allegations against the Company

The lawsuit is based on several allegations against Bit Digital by J Capital Research.

“[Bit Digital] tried to downplay the criminality,” the US-based research company wrote.

The primary allegation in the lawsuit includes the misrepresentation of the scale of the company’s Chinese Bitcoin mining business.

“The company reported at end Q3 2020 that it was operating 22,869 bitcoin miners in China, but that is simply a lie,” the research company alleged, and the lawsuit picked it up. “With no subsidiary in China, that would be illegal and the machines subject to confiscation.”

The research company stated that it enquired with local Chinese governments and found out that Bit Digital does not have any Bitcoin mining infrastructure in the country. Even the companies from which the mining company said to have purchased new miners have denied any such deal.

“We think the company has simply stolen the $18.8 mln it claims to have spent on miners in the first nine months of 2020,” the research company stated.

Bit Digital, however, officially denied all the allegations a day before the lawsuit was filed.

“We have not signed leases for bitcoin mining facilities. In order to achieve lower utility costs, the mining facilities are maintained by our third-party suppliers,” BTBT clarified. However, the statement failed to convince the plaintiffs.

“Defendants’ [Bit Digital] positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis,” the lawsuit added.

Meanwhile, the impact of the allegations was clearly reflected on the share price of the company, as it went down by 45 percent from the peak achieved earlier this month.