In December 2022, amidst the largest meltdown the industry has ever seen, one of the world’s largest BTC miners, Core Scientific (NASDAQ: CORZQ), filed for bankruptcy.
Now, New York law firm Pomerantz LLP is investigating whether Core Scientific committed securities fraud. It follows a report by Culper Research alleging that the firm “wildly oversold both its mining and hosting businesses, which it cobbled together in a series of questionable transactions before dumping onto the market via SPAC.”
What is the Pomerantz lawsuit alleging Core Scientific did?
The initial report from Culper Research alleges that Core Scientific engaged in “securities fraud and other unlawful practices” that led to its share price falling on several occasions.
As well as “wildly overselling” its business, the report alleges that Core Scientific waived a 180-day lockup period of over 282 million shares, freeing them to be dumped on the market in March. This led to the share price dumping by 9.4% on March 3.
The report alleges that higher-ups at Core Scientific had “abandoned any pretense of care for minority shareholders.”
On top of this, Pomerantz emphasized an incident in September 2022, in which now-bankrupt Celsius Network filed a motion in bankruptcy court accusing Core Scientific of violating automatic stay provisions, adding improper surcharges, and failing to meet its contractual obligations.
When Celsius Network accuses you of running your business in an amateur and fraudulent fashion, you know things are bad! Then again, this is just a bunch of vultures picking over the bones of a carcass, and Celsius Network can hardly be taken at its word, so we’ll see what the truth is as proceedings continue.
More fraud and corruption in the digital currency industry
At CoinGeek, we’ve been screaming from the rooftops for years about how most of the businesses in this industry are corrupt criminal enterprises run by outright fraudsters.
The past year has proven our narrative correct, revealing that many of the industry’s former heroes, such as Alex Mashinsky, Su Zhu and Kyle Davies, and Sam Bankman-Fried were little more than incompetents and criminals out for their gain at the expense of naive retail speculators.
The alleged behavior of Core Scientific insiders only bolsters that narrative. If one of the biggest digital currency miners, which is traded on the NASDAQ, can’t operate professionally and is willing to engage in practices that hurt its investors, how can anyone trust the many offshore and private firms that aren’t subject to the same regulations and oversight?
It remains to be seen whether Core Scientific insiders actually did what is being alleged, but as the old saying goes, there’s no smoke without fire. If these allegations turn out to be true, it shouldn’t surprise anyone in the slightest. After all, if the last year has taught us anything, it’s that almost the entire digital currency industry is little more than a large-scale scheme to enrich company founders at the expense of people who mistakenly trust them, whether they be users or investors.
Sooner or later, this mess will be cleaned up for good, and the era of blockchain utility will rise. Until then, subscribe for more news on the arrests, manhunts, and criminal cases that will characterize the next several years in the industry.
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Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
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