Marathon Digital, a US-based crypto mining firm, is currently embroiled in a legal battle with its own shareholders. Accusations of breaching fiduciary duties, unjust enrichment, and misusing corporate assets have been leveled against the CEO, Fred Thiel, and other top executives.
The shareholders took the matter to the United States District Court of Nevada, where they filed a complaint against Thiel and nine other Marathon executives on July 8.
Allegations and Claims
The lawsuit comprises five key claims, including violations of the US Exchange Act, breach of fiduciary duties, unjust enrichment, and mismanagement of corporate assets.
The specific focus of the complaint is on Thiel, Okamoto, Salzman, and Gallagher, with the plaintiffs seeking restitution for what they claim were wrongful acts leading to a complaint filed by the Securities and Exchange Commission (SEC) against the company.
Seeking Restitution
The plaintiffs have not quantified the compensation they seek, leaving it to the court’s discretion to determine the appropriate restitution amount.
In addition to seeking compensation, the shareholders also aim to strengthen the company’s governance structure. Their plan involves enhancing the Board’s oversight of operations by proposing at least four candidates from the shareholders to join the Board. They also wish to eliminate the previous procedure of director elections, introducing a more inclusive approach.
Allegations of Mismanagement
The legal team representing the shareholders accuses the management of downplaying the company’s issues and engaging in deceptive practices.
They allege that the management artificially inflated Marathon’s valuations, received excessive compensation, conducted insider sales for personal gain, and obtained unwarranted high bonuses based on false and misleading statements.
Regulatory Trouble
Marathon faced regulatory trouble in May when it received a subpoena from the SEC regarding transactions with related parties, particularly during the establishment of their facility in Montana.
This wasn’t the first time the regulator had concerns about the company. In 2021, they had already requested documents and communications related to the same mining facility.
CEO’s Optimism Amidst Crisis
Surprisingly, despite the ongoing legal and regulatory challenges, CEO Fred Thiel expressed optimism about the company’s future strategy.
He outlined plans to reduce Marathon’s net loss from $12.9 million ($0.12 per share) in Q1 2022 to $7.2 million ($0.05 per share) in the current year.
The situation has caught the attention of the crypto community and investors, leaving many wondering how the legal battle will unfold and how it might impact Marathon Digital’s future.
The company and its accused executives have yet to release official statements in response to the lawsuit and its specific allegations.
As the legal battle unfolds, it remains to be seen how Marathon Digital will address the claims made by its shareholders and whether any governance changes will be implemented to improve transparency and accountability within the company.