Canaan Creative faces class-action lawsuit in US

It was only a few months ago that Canaan Creative, a manufacturer of cryptocurrency mining equipment, completed its initial public offering (IPO) in the United States. The China-based company held its offering last November, but wasn’t able to secure as much funding as it had hoped.

Now, an investor has launched a lawsuit against Canaan, arguing that it lied to regulators and investors about its operations and financial support. The lawsuit is calling for other investors to join in so that it can reach class-action status. 

Philippe Lemieux filed his lawsuit in the U.S. District Court for the District of Oregon on March 4. With the help of the Rosen Law Firm, Lemieux alleges that he purchased 200 shares in the company on February 12 when the price was close to its highest, but did so assuming certain truths that had been provided by Canaan. Among these was the assertion that the company had “strategic cooperation” with a firm for the purchase of $150 million in products. However, the chairman of that company, Hangzhou Grandshores Weichaeng Technology, owns almost 10% of Canaan. 

Lemieux also claims that Canaan highlighted business relationships with companies that, while valid, most likely had nothing to do with crypto mining, making their ties irrelevant. The plaintiff also provides examples from Marcus Aurelius Value (MAV), an entity that, according to its website, provides “extremely thorough due diligence into publicly traded companies.” 

In its report on Canaan, “Canaan Fodder,” MAV asserts, among other questionable activity, “[Canaan’s] largest customer in 2016 was listed as an individual named Chen Jian (陈建). We believe this is likely the same Chen Jian who is identified in internet postings (here, here) as the industry operator allegedly behind a chinese [sic] crypto scam involving the now defunct [sic] 3ico.com that left investors who suffered losses protesting with banners in the streets.”

It also states, “While neither [Canaan’s] Hong Kong listing application or its SEC (Security and Exchange Commission) filings disclose the names of its current top customers, we find it highly irregular that [Canaan] abruptly deleted 8 of the 11 unique distributors that were featured on its website shortly before the company’s NASDAQ IPO (as archived by waybackmachine in May 2019).” Seven of those distributors are identified by MAV as being “small, defunct, or otherwise incapable of buying material amounts of product from” Canaan.

The law firm launched an investigation into Canaan a day after MAV published its blog post. Lemieux apparently responded to the announcement of the investigation and the lawsuit was then drafted on March 3. The suit targets Canaan, as well as its chairman and CEO, Nangeng Zhang and several other officers of the company. 

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.