Marathon Digital, a major player in the bitcoin mining industry, is in hot water after shareholders filed a lawsuit in the United States District Court for the District of Nevada alleging that Marathon CEO Fred Thiel and nine other Marathon executives violated fiduciary duties, engaged in unfair profiteering, and misappropriated company assets.
In the complaint filed on July 8, shareholders claimed that the firm misstated its revenue, cost, and other financial information in its 2021 and 2022 SEC filings, downplayed its serious problems with internal controls, and engaged in a lucrative insider sale of the company at artificially inflated prices, obtaining proceeds of over $3 million.
Therefore, the plaintiffs are calling for a total revamp of the corporate structure as well as increased board oversight of activities. They want to do away with the current practice of electing directors by holding at least four shareholder nominations for the board.
In addition, the legal team is pursuing the possibility of financial settlements from Thiel, Merrick Okamoto, Simeon Salzman, and Hugh Gallagher for the “wrongful acts” that prompted the U.S. Securities and Exchange Commission [SEC] to take action. The lawyers for the shareholders didn’t ask the defendants for a precise amount, leaving the level of compensation up to the court.
SEC Summoned Marathon Digital Twice
In the fiscal quarter that ended in September 2021, Marathon Digital received its first subpoena. Following that, the Bitcoin miner based in Las Vegas amended its annual report and revealed in February of this year that it had discovered accounting errors in the financial accounts for numerous quarters.
The second subpoena from the US SEC regarding its 100-megawatt data center in Hardin, Montana, was issued in May. At the time, Marathon Digital revealed it was “relating to, among other things, transactions with related parties” that took place while it was building the plant in Montana, according to its quarterly report submitted on May 10, adding:
“We understand that the SEC may be investigating whether or not there may have been any violations of the federal securities law. We are cooperating with the SEC.” However, the mining firm or any of its top management has yet to comment in relation to the most recent filing.