Amid Riot Blockchain’s claims to have moved into bitcoin mining and acquiring blockchain startups, investors are accusing the firm of violating U.S. securities law by issuing misleading and false information.
According to court filings, investors in the firm have submitted three class action complaints against Riot Blockchain (on Feb. 17 and 22) in three U.S. states, accusing the firm of share-price manipulation through a dubious cryptocurrency pivot.
As reported previously by CoinDesk, Riot Blockchain is one of the several public companies that have seen major stock price rallies after announcing a blockchain-based re-branding.
In October last year, the firm changed its name from Bioptix to Riot Blockchain. Subsequently the company said its business has shifted from biotechnology to blockchain, including bitcoin mining.
Following the initial announcement, the firm’s stock price on NASDAQ soared from around $8 to as high as $38 in December 2017. Yet, shares are now down by roughly 70 percent from those levels, and trading at just over $10.
As a result, investors are filing complaints to courts in Florida, Colorado and New Jersey seeking remedy for the investment loss, arguing Riot Blockchain sent out false information to disguise its absence of genuine blockchain expertise.
One of the filings states:
“Riot lacked a meaningful business plan with respect to the cryptocurrency business and had only minimal investments in cryptocurrency products; the Company changed its name to Riot Blockchain, Inc. as part of a scheme to capitalize on public interest in cryptocurrency products, thereby driving up the Company’s stock price and enriching inside shareholders.”
Riot Blockchain did not respond to a request for comment on the lawsuits.
The cases come as the latest that slap on public companies that have seen major price corrections after first recording significant share price surges due to a blockchain pivot.
Previously, Xunlei, a China-based cloud technology company listed on New York Stock Exchange, was also hit by similar allegations that accused the firm of distributing false and misleading information regarding its blockchain-related business.
The Colorado court filing is shown below:
Bruce Greenawalt v.s. Riot Blockchain by CoinDesk on Scribd
Court image via CoinDesk archive