Embattled Argo Blockchain (NASDAQ: ARBK) has hit another rough patch following a new class action lawsuit filed by disgruntled investors against the mining company.
In their lawsuit, the plaintiffs claim that Argo misrepresented some facts regarding the financial strength of the company in its security offering to the public. In September 2021, Argo conducted an initial public offering (IPO) that raised $105 million, but investors now claim that the offering documents were “negligently prepared.”
“Argo was highly susceptible to and/or suffered from significant capital constraints, electricity, and other costs, and network difficulties,” the court filing read. As a result, the plaintiffs allege that the firm’s ability to mine BTC, execute its business strategy, and meet its obligations to investors was significantly scuttled.
The plaintiffs further alleged that Argo’s “business and financial prospects were overstated,” and as a result, the company was in breach of its fiduciary duties. Upon revelation of the actual financial standing of the company, the company’s shares tumbled from an initial listing price of $15 to $1.96 per share.
“Had [the investors] known the truth, they would not have purchased or otherwise acquired said securities, or would not have purchased or otherwise acquired them at the inflated prices that were paid,” the complaint said.
In June, Argo’s operational update blamed the decline of its mining revenues on soaring electricity costs and a rise in mining difficulty for BTC. After months of swimming against the tide, Argo entered into an agreement to sell Helios, its flagship mining facility, to Galaxy Digital (NASDAQ: BRPHF) for $65 million.
Three days before the class action lawsuit, Argo notched a small win after it regained compliance with Nasdaq by maintaining its common stock minimum bid of $1 for 30 straight days.
Tough times for mining firms
Across the board, mining firms have been roiling under the weight of sky-high energy costs and an uncertain regulatory climate. Canadian block reward mining firm Bitfarms (NASDAQ: BITF) has been trying to keep its share price above the $1 mark or risk delisting on Nasdaq.
Core Scientific (NASDAQ: CORZW) announced its filing for bankruptcy in December 2022, while other North American-based firms like Greenidge Generation and Compute North are facing rough patches of their own.
Regulators worldwide are hiking energy costs and taxes for miners while law enforcement agencies are cracking down hard on unregistered virtual currency mining activities.
Watch: Blockchain mining & energy innovation
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