Key facts
- Hut 8 agreed to a $2.35 million settlement to resolve a securities class action lawsuit.
- Investors alleged Hut 8 misled the market regarding operational issues from its merger with U.S. Bitcoin Corp.
- The lawsuit focused on alleged energy and internet connectivity problems at the King Mountain facility in Texas.
- The settlement covers investors who purchased Hut 8 securities between February 13, 2023, and January 18, 2024.
- Hut 8 denies wrongdoing and did not admit fault as part of the proposed settlement.
Hut 8 has agreed to a $2.35 million settlement to resolve a securities class action lawsuit brought by investors. The investors accused the bitcoin miner of misleading the market about operational problems related to its 2023 merger with U.S. Bitcoin Corp. (USBTC).
The proposed settlement, filed in the U.S. District Court for the Southern District of New York, covers claims from investors who purchased Hut 8 securities between February 13, 2023, and January 18, 2024. The settlement still requires approval from U.S. District Judge Victor Marrero.
The core of the litigation centered on Hut 8's all-stock merger with USBTC, which closed in November 2023. Investors alleged that Hut 8 overstated the benefits of the transaction and failed to adequately disclose energy and internet connectivity issues at the King Mountain facility in Texas, a joint venture in which USBTC held a 50% interest prior to the merger.
Hut 8 has denied any wrongdoing and stated it did not violate the law or cause losses to investors. The lawsuit was prompted by a January 2024 report from short-seller J Capital Research, which questioned Hut 8's statements about the merger and highlighted alleged problems at King Mountain. Hut 8's share price declined following this report, leading to the subsequent investor lawsuits.
Prior to the settlement, Judge Marrero had dismissed some of the investors' claims, including those related to the Securities Exchange Act of 1934 and certain Securities Act of 1933 claims concerning USBTC's financial condition. However, he allowed claims to proceed regarding alleged omissions about risks at the King Mountain facility, which is crucial for mining operations due to its reliance on stable power and internet access.
Lead plaintiff Abhishek Maheshwari stated that the settlement offers investors immediate recovery while mitigating the risks of a potential loss at trial. The defendants had indicated they would challenge the traceability of shares after the merger. Plaintiff counsel estimated the $2.35 million settlement represents approximately 19.6% of the maximum recoverable damages, which they calculated to be around $12.08 million. This recovery is considered above recent averages for settlements involving only Securities Act claims.
The parties reached the agreement after a full-day mediation session on May 7, facilitated by JAMS mediator Jed Melnick. Although an immediate agreement was not reached, a mediator's proposal was accepted on May 13, leading to the formal stipulation dated June 18.
