United States-based cryptocurrency mining company Marathon Digital is facing legal action as its shareholders accuse CEO Fred Thiel and other top executives of breaching fiduciary duties, enriching themselves unfairly, and misusing corporate assets.
On July 8, a shareholder complaint was filed against Fred Thiel and nine other Marathon executives in the United States District Court for the District of Nevada.
The lawsuit includes five claims, including violations of the U.S. Securities Exchange Act, breach of fiduciary duties, unjust enrichment, and misappropriation of corporate assets.
The plaintiffs are also seeking potential compensation from Thiel, Merrick Okamoto, Simeon Salzman, and Hugh Gallagher for their alleged wrongful acts leading to a complaint filed by the U.S. Securities and Exchange Commission (SEC) against the company.
The shareholders’ legal team did not specify a specific amount of compensation, leaving it to the court to decide.
Furthermore, the shareholders aim to rectify the company’s governance by enhancing the board’s oversight of operations, nominating at least four candidates from shareholders to the board, and eliminating the previous procedure for directors’ elections.
According to the legal team, the company’s management has downplayed its issues, artificially inflated Marathon’s valuation, received excessive compensation, engaged in lucrative insider sales, and obtained undeservedly high bonuses based on false and misleading statements.
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In May, Marathon received a subpoena from the SEC, which was related to transactions with related parties that took place during the construction of its facility in Montana.
In 2021, the regulator had previously requested the firm to provide documents and communications regarding the same mining facility.
Despite facing these challenges, Thiel expressed optimism in May when outlining the company’s strategy to reduce its net loss from $12.9 million ($0.12 per share) in Q1 2022 to $7.2 million ($0.05 per share) in 2023.
While the decline in the price of Bitcoin also impacted Marathon’s quarterly results, the mining firm managed to reduce its debt in March.
It paid off a term loan with Silvergate Bank, allowing the release of the 3,132 BTC held as collateral for the loan.
Marathon stated that this move would eliminate $50 million of debt and reduce its annual borrowing costs by $5 million.
