Riot Blockchain Gets Hit by Another Shareholder Lawsuit

After converting its identify to Insurrection Blockchain in October to incorporate the phrase “blockchain,” the general public corporation watched its inventory skyrocket from $eight a percentage to greater than $38 all the way through a cryptocurrency rally initially of the yr.

The primary vital drawback was once the corporate didn’t have any actual focal point on blockchain era. Sooner than October, Insurrection was once referred to as Bioptix, a maker of diagnostic equipment for the biotech trade. The corporate additionally modified its ticker image to RIOT from BIOP.

Some other drawback was once that key shareholder Barry Honig were given stuck along with his hand within the cookie jar, promoting off a large stake of his stocks at $38 consistent with percentage after the identify exchange.

On February 22, 2018, legislation company Robbins Geller Rudman & Dowd LLP introduced it was once submitting a class-action lawsuit towards Insurrection. The grievance fees Insurrection, along side Honig and corporate CEO John O’Rourke and CFO Jeffrey McGonegal, with securities violations.

In particular, the fees declare that regardless of its loss of blockchain experience, Insurrection modified its identify to generate investor enthusiasm to additional an insider scheme that will permit Insurrection’s controlling shareholders to offload their shares at grossly inflated costs.

A minimum of two different court cases had been filed towards Insurrection and its principals, charging them with securities violations and false and deceptive statements.

Those court cases observe a scathing investigation into Insurrection by way of CNBC on February 16, 2018, that raised questions in regards to the corporation’s trade fashion and Honig. Within the wake of that record, stocks tumbled 33 % to $11.46. It’s most probably those class-action court cases could also be the primary of many to come back towards Insurrection.

Shady Actions

On October four, 2017, Insurrection followed its new identify and headed off in a thorough new trade path, pronouncing it was once going to put money into and perform blockchain applied sciences with a focal point on Bitcoin and Ethereum. The corporate had no earlier trade in blockchain era, but in press releases, Insurrection portrayed itself as a seasoned participant within the area.

“At Insurrection Blockchain, our staff has the perception and community to successfully develop and expand blockchain belongings,” mentioned Insurrection’s then-CEO, Michael Beeghley, in a remark on the time.

The corporate has a historical past of questionable actions. In December, Insurrection started buying cryptocurrency mining apparatus. However moderately than buying from the producer or different providers, the corporation paid greater than $11 million for apparatus value simplest $2 million by way of buying it via a newly shaped shell entity.  

Honig could also be charged with exercising outdoor affect over the corporate’s trade operations. Starting in April 2016, lengthy earlier than the corporate modified its identify to Insurrection, Honig started buying stocks within the corporation. Via December 2016, he had change into the corporate’s greatest shareholder, proudly owning greater than 11 % of the corporate. He used that affect to appoint a number of new administrators to the board, together with O’Rourke.

Along with insider promoting after the identify exchange, different being concerned indicators in regards to the corporation integrated: Insurrection misplaced two auditing corporations in only one yr, and two annual stockholder conferences have been postponed on the final minute. Additionally, a few of Insurrection’s trade offers concerned buyers who had labored on identical offers in combination prior to now, elevating questions in regards to the corporation’s governance.

“All Aboard”

Insurrection isn’t the one corporation to have jumped onboard the rename-your-company  “blockchain” bandwagon. A number of different firms have additionally rewritten their names to money in at the blockchain and cryptocurrency craze.

In December, the Lengthy Island Iced Tea Company, a New York–based totally corporation that makes iced tea, rebranded itself as “Lengthy Blockchain.” Its corporation stocks rose 300 % in consequence. In January, legacy images corporation Kodak introduced the release of KODAKCoin, a “photo-centric” cryptocurrency for photographers, and its inventory went up 80 % inside hours.

Proceedings like those now piling up towards Insurrection stand as a reminder identify exchange isn’t sufficient — an organization wishes actual blockchain revel in and era and a cast marketing strategy at the back of it earlier than including “blockchain” to its identify.

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