A New York-based law firm says it has started an investigation into whether Bitcoin miner Core Scientific and its leadership potentially engaged in “securities fraud and other illegal business practices” that led to its share price falling multiple times.
According to securities class action firm Pomerantz LLP, the investigation was prompted by a Culper Research report in 2022, which alleged that Core Scientific had “massively oversold” its mining and hosting businesses in 2021 and also waived a lock-up period. of more than 282 million shares, making them “free to be dumped” in March.
This report claimed that Core Scientific members had “abandoned any pretense of caring for minority shareholders”, noting that on this news, Core Scientific’s share price fell 9.4% on March 3.
The law firm also highlighted an incident on Sept. 28, in which crypto lender Celsius Network filed a motion in bankruptcy court, accusing Core Scientific of violating automatic stay provisions, adding improper surcharges, and failing to meet its contractual obligations.
This led to its share price falling 10.3% the next day, on September 29, it said.
In a final incident, the law firm said on October 27, 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 only I had 24 Bitcoin (BTC) compared to 1051 BTC on September 30.
This news sent Core Scientific’s share price falling sharply, closing at $0.22 per share, a 78.1% drop, the firm said.
Pomerantz LLP said it was investigating these claims on behalf of Core Scientific investors and has asked those investors to join the potential class action lawsuit.
The same law firm archived a class action lawsuit against Silvergate Capital on December 13 for making “materially false and/or misleading statements” and failing to disclose “material adverse facts about the company’s business, operations and prospects.”
On Jan. 4, Cointelegraph reported that Core Scientific had agreed to shut down 37,000 mining rigs was hosting Celsius due to the bankrupt cryptocurrency lender not paying its energy bills. According to the Bitcoin miner, this played a significant role in the liquidity problems that led to his filing for Chapter 11 bankruptcy on December 21.
On December 23, Cointelegraph reported that a US bankruptcy court had granted Core Scientific provisional approval to access a $37.5 million loan from existing creditors to finance these liquidity problems.