Bitcoin mining giant and competitor to Bitmain Canaan Inc. (aka Canaan Creative) is being sued by investors who claim that the company has violated several industry laws.
Canaan Is Taking a Hard Hit
The suit was filed in Oregon last Wednesday by investor Phillippe Lemieux, who believes the enterprise lied to shareholders following its recent initial public offering (IPO). Lemieux claims that the company presented false information about its financial well-being and about its status with the Securities and Exchange Commission (SEC).
Among the main points of the lawsuit is the alleged partnership between Canaan and Grand Shores Weicheng Technology Co., which is based in Hangzhou and is a potential “related party” to Canaan. Attorneys representing Lemieux and other investors claim that such a partnership does not exist. In addition, they say Canaan removed several distributors from its website prior to its IPO taking place and failed to disclose the fact that several of its Chinese clients held no positions in the crypto mining space.
These clients were thus unlikely to serve as “repeat customers,” which placed the company’s revenue and future status as a supplier and servicer of mining equipment in jeopardy.
Lawsuits like these are common in the cryptocurrency world. One of the biggest ones hitting the space at press time is a class-action suit against Ripple, the distributor of the world’s third-largest cryptocurrency by market cap XRP. Ripple is being sued by a group of initial investors who claim that the company has repeatedly lied about its status as a non-security. In addition, one plaintiff has described Ripple as an “ongoing ICO [initial coin offering].”
The history of Canaan’s IPO is likely to raise a few eyebrows here and there. The company engaged in the IPO in November of last year, but only managed to raise about $90 million after companies like Credit Suisse Group AG decided not to participate. In addition, the enterprise has failed repeatedly to get itself listed on the stock exchanges of both Hong Kong and mainland China.
The IPO Is a Little Sketchy
Still, Canaan remains the second largest crypto mining facility after Bitmain. Both are based in China, and both faced permanent shutdowns last year after the country was in a period of limbo and trying to decide if crypto mining was indeed permissible. It had been the longtime sentiment of regulators that bitcoin and digital currency mining of any kind was responsible for hardcore damage to the environment, though lawmakers initially retracted this idea and decided that crypto mining should be legal.
China stood to lose millions of dollars in potential tax revenue by preventing crypto mining, which could be why legislators eventually voted against the ban. China still holds the most power in the crypto industry when it comes to mining, though North America has been moving up steadily.