Argo Blockchain sued over misleading statements

Argo Blockchain has been accused of violating federal securities law during its 2021 initial public offering (IPO) of its American Depositary Shares (ADS), according to a filing in the United States District Court for the Eastern District of New York.

The latest development is another blow to Argo, which has struggled to stay afloat amid a brutal crypto winter. The complaint alleged that the company negligently prepared its IPO documents that hid important details that would affect the profitability of the business.

Lawsuit against Argo

In the class action, investors in Argo Blockchain have accused the firm of making false statements and omitting key information, thereby failing to disclose capital constraints, power and other costs, as well as network issues. The filing said the restrictions hindered its ability to mine Bitcoin and operate the Helios facility in Texas.

The argument centered around Argo’s business being less sustainable than investors were led to believe. They also claimed that the firm’s business and financial prospects were overstated. As a result of “wrongful acts and omissions” by Argo, investors were on 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 not misleading and were not prepared in accordance with the rules and regulations governing their preparation.”

During the IPO, the London-based miner issued about 7.5 million ADS shares at an offer price of $15, resulting in a dividend of approximately $105 million to the mining company. However, the share price has fallen sharply since then.

Crypto Winter proved rocky for Argo

Along with several miners, Argo Blockchain was forced to sell more than it mined in a month last summer when prices went south. As the stock took a beating, the previously announced plan to raise $27 million was shelved. At the end of 2022, it suspended trading of its shares on Nasdaq.

Argo even sold the Helios mining facility in Texas to Galaxy Digital for $65 million. The agreement also required Galaxy will also provide the mining company with a $35 million loan to avoid bankruptcy.