A report from Culper Research prompted the investigation, alleging that Core Scientific had “wildly oversold” its mining and hosting businesses.
A New York-based law firm has launched an investigation into whether Bitcoin miner Core Scientific and its leadership may have engaged in “securities fraud and other unlawful business practices” that caused its stock price to fall on multiple occasions.
The investigation was prompted by a report from Culper Research in 2022, which alleged that Core Scientific had “wildly oversold” its mining and hosting businesses in 2021 and also waived a 180-day lockup period of over 282 million shares, making them “free to be dumped” in March.
This report claimed that Core Scientific insiders had “abandoned any pretense of care for minority shareholders,” noting that Core Scientific’s share price fell 9.4% on March 3 as a result of this news.
The law firm also cited an incident on Sept. 28 in which cryptocurrency lender Celsius Network filed a motion in bankruptcy court accusing Core Scientific of violating the automatic stay provisions, adding excessive surcharges, and failing to meet contractual obligations.
Its stock price fell 10.3% the next day, on September 29, as a result.
In a final incident, the law firm stated that on Oct. 27, Core Scientific announced that “given the uncertainty regarding the Company’s financial condition, substantial doubt exists about the Company’s ability to continue,” revealing that it only had 24 Bitcoin, compared to 1,051 BTC on Sept. 30.
This news caused Core Scientific’s stock price to plummet, closing at $0.22 per share, a 78.1% drop, according to the company.
Pomerantz LLP stated that it is investigating these claims on behalf of Core Scientific investors and has invited any such investors to join the potential class action.
On December 13, the same law firm sued Silvergate Capital in a class-action lawsuit for making “materially false and/or misleading statements” and failing to disclose “material adverse facts about the Company’s business, operations, and prospects.”
Cointelegraph reported on January 4 that Core Scientific had agreed to shut down 37,000 mining rigs hosted by Celsius due to the bankrupt cryptocurrency lender’s failure to pay its power bills. This, according to the Bitcoin miner, played a significant role in the liquidity issues that led to its Chapter 11 bankruptcy filing on December 21.
Cointelegraph reported on December 23 that a bankruptcy court in the United States had granted Core Scientific interim approval to access a $37.5 million loan from existing creditors to fund these liquidity issues.