Argo Blockchain has been accused of federal securities law violation during the initial public offering (IPO) of its American depositary shares (ADS) in 2021, according to a filing in the United States District Court for the Eastern District of New York.
The latest development is yet another blow to Argo, which was struggling to stay afloat amidst a brutal crypto winter. The complaint alleged that the company negligently prepared its IPO documents which hid crucial details that would affect its business profitability.
Lawsuit Against Argo
In the class action lawsuit, investors of Argo Blockchain have accused the firm of making untrue statements and omitting key information, thereby failing to disclose its capital constraints, electricity, and other costs, in addition to network difficulties. The filing said the constraints hampered its ability to mine Bitcoin and operate its Helios facility in Texas.
The argument was centered around Argo’s business being less sustainable than investors were led to believe. They also alleged that the firm’s business and financial prospects were overstated. As a result of “wrongful acts and omissions” by Argo, investors were at the receiving end of significant losses.
“The Offering Documents were negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading and were not prepared in accordance with the rules regulations and governing their preparation.”
During its IPO, the London-based miner issued about 7.5 million ADS shares at an offering price of $15, resulting in proceeds of roughly $105 million to the mining. The share price, though, has plunged massively since then.
Crypto Winter Proved Rocky for Argo
Alongside several miners, Argo Blockchain was forced to sell more than it mined in a month last summer as prices went south. As its shares took a beating, the formerly announced plan to raise $27 million was called off. By the end of 2022, it suspended trading of its shares on Nasdaq.
Argo even sold its Helios mining facility in Texas to Galaxy Digital for $65 million. The deal also required Galaxy will also provide the mining company with a $35 million loan to avoid bankruptcy.