On January 18th, Bitcoin mining company Hut 8 experienced a significant setback as its share price plummeted by over 23%.
This decline occurred on the same day that Hut 8 celebrated its listing on Nasdaq by ringing the opening bell.
Simultaneously, an unverified report started circulating, alleging that insiders were preparing to offload their Hut 8 stock holdings.
Hut’s share price fell sharply, dropping from $9.30 to as low as $7.10 in after-hours trading.
The decline coincided with the release of a report by JCapital Research, an activist short-selling firm, titled “The Coming HUT Pump and Dump.”
This report raised concerns about Hut 8’s recent merger with fellow Bitcoin miner US Bitcoin (USBTC), which took place on November 30, 2023.
JCapital Research, known for its short-side bias, criticized the $725 million merger, claiming that USBTC had a history of legal issues.
They also alleged that a significant portion of the merged company’s shares were held by an undisclosed related party.
According to the report, USBTC had defaulted on a loan and faced government fines for securities violations in its short existence.
Furthermore, JCapital accused USBTC’s CEO, Michael Ho, who had become Hut 8’s chief strategy officer post-merger, of concealing his association with stock promoters known as the Honig Group.
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The Honig Group had faced accusations from the U.S. Securities and Exchange Commission in 2019, including involvement in “classic pump and dump” schemes. Honig had settled these charges and agreed to a ban on trading penny stocks.
The report’s conclusion was grim, suggesting that Hut 8 shareholders might suffer from an over-leveraged pump-and-dump scenario, ultimately holding shares in an inefficient Bitcoin mining company that remained unprofitable even with Bitcoin prices over $60,000.
The credibility of the report came under scrutiny within the crypto community, with some members expressing uncertainty about its authenticity.
This uncertainty triggered panic selling among investors, contributing to the share price decline.
Cointelegraph reached out to JCapital to validate the claims made in their report and also contacted Hut 8 for their response to the allegations.
Notably, the report coincided with the day Hut 8’s CEO, Jaime Leverton, marked the completion of the all-stock merger with USBTC by ringing the opening bell at Nasdaq’s headquarters in New York.
Unlike some other cryptocurrency miners that had to sell portions of their Bitcoin holdings due to challenging market conditions, Hut 8 reported an increase in its self-mined Bitcoin reserves.
In early January, the company revealed that it had mined 453 Bitcoin in December 2023, bringing its total reserves to 9,195 BTC, valued at approximately $377 million at current Bitcoin prices.
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