Bitcoin Mining Equipment Company Canaan Sued By Investor Alleging Securities Law Violations

Bitcoin mining equipment company Canaan Inc. (NASDAQ: CAN) is being sued by an investor claiming the company broke U.S. securities laws.

What Happened

Phillippe Lemieux, an investor in Canaan, filed a class-action lawsuit on Wednesday in the United States District Court for The District of Oregon. He alleges the company misled investors regarding its financial health and operations status through its Securities and Exchange Commission (SEC) filing for its initial public offering.

The lawsuit names underwriters China Renaissance Securities, Huatai Financial Holdings, Galaxy Digital, CMB International Capital, Citigroup Global Markets - a Citigroup Inc. (NYSE: C) company, and others.

Additionally, Scott+Scott Attorneys at Law, a national securities and consumer rights litigation firm released a statement to the press on Thursday saying that Hangzhou, China-based Canaan along with other defendants mislead investors regarding a “purported” strategic cooperation with Hangzhou Grandshores Weicheng Technology Co, which is a related party to Canaan.

The law firm further alleges that Canaan hid information regarding the company’s financial health and failed to mention that the company removed “numerous” distributors from its website before its IPO. Moreover, it did not reveal that many of its Chinese clients in the past were not in the Bitcoin mining industry and were, therefore, unlikely to be repeat customers.

Why It Matters

The class-action suit has called for more investors to join in. Investor’s rights law firm Rosen is also continuing its investigation into Canaan.

Canaan went public on Nasdaq in November 2020. The company only managed to raise  $90 million on opening after a key underwriter, Credit Suisse Group AG (NYSE: CS), exited the IPO.

Canaan is the world’s second-largest cryptocurrency mining equipment manufacturer and only went public on its third attempt after failing to list on mainland China and Hong Kong in 2018. 

Price Action

Canaan shares traded 0.41% higher at $4.85 in the after-hours session on Thursday. The shares had closed the regular session 3.65% lower at $4.83.