By Michael Scott
Marathon shareholders filed a lawsuit accusing the top management led by chief executive Fred Thiel of coordinating a wasteful exercise. The lawsuit alleges that the top executives breached the fiduciary duties and pursued unjust enrichment.
The shareholders of the US-based crypto mining firm accuse the top executives of failing to discharge oversight and stewards duties. The shareholders allege the miner’s chief executive Thiel pursued unjustified enrichment.
Shareholders Decry the Wasterful and Deceptive Management at Marathon Digital
The shareholders admitted filing the complaint before the District of Nevada court on July 8. The plaintiffs are suing the firm’s executives on five counts. Primarily, they submitted that the chief executive and nine executives breached the Securities Exchange Act. Also, they pursued unjust enrichment and wasteful management of the company’s assets.
Besides breaching fiduciary duties, the plaintiffs plead with the court seeking retribution from Thiel alongside Okamoto, Salzman, and Gallagher being the executives who orchestrated the wrongful acts. They allege that the unlawful actions by the executive prompted the US Securities and Exchange Commission (SEC) to lodge a complaint against the miner. The counsel representing the plaintiffs was noncommittal on the sum sought by the aggrieved, instead petitioning the court to decide the amount.
Shareholders Accuse Marathon Management of Enriching Themselves
The shareholders reiterated their desire to amend the firm’s governance by fostering the board’s input to supervise operations. The shareholders are proposing to nominate four candidates to sit on the board. Primarily, they desire to eliminate previous procedures utilized in directors’ elections.
The legal team submitted that the management is deceptive for continually downplaying its shortcomings. The counsel alleges the administration misrepresented the statements of facts by artificially inflating the firm’s valuation. Reviewing the documents annexed to the filing captures plaintiffs’ complaints of Marathon executives drawing excessive compensation.
The lawsuit claims that the top executives would receive excessive compensation. They demonstrated unprofessional conduct by reaching lucrative insider sales. Also, the executives earned elevated bonuses based on misleading and false financial performance statements.
The July 8 filing piles up the legal hurdles that the Marathon’s management confronts. The executives received a subpoena issued by the Gary Gensler-led SEC in May. The security watchdog sought clarity on the related parties’ transactions executed when constructing the Montana-based facility.
Marathon has, in the past, become a subject of the regulator’s radar. The SEC had demanded the production of documents and communications relating to the Montana mining facility.
Marathon Road to Recovery
The legal battle facing Marathon Digital is yet to dampen the optimism portrayed by Thiel in May. The chief executive indicated that Marathon had deployed a viable strategy enabling the firm to recover from the $12.9 million net loss. He projected that the crypto miner was on track to reduce the $0.12 loss per share it suffered in the first quarter of 2022 to $7.2 million. The strategy would lower the net loss to $0.05 per share by 2023.
Marathon Digital’s poor performance is attributed to the plunge suffered by the Bitcoin price during the prolonged crypto winter. The price decline eroded the miner’s quarterly results.
Nonetheless, Thiel-led management has managed to lower the miner’s debt by March. The company confirmed settling the term loan advanced by the now embattled Silvergate Bank. The settlement helped free 3132 Bitcoins placed as collateral to the loan.
Settling the Silvergate term loan would lower the miner’s debt by $50 million, thus reducing the borrowing cost by $5 million.
Marathon Digital’s Market Outlook
A review of the market performance of the digital asset tech company shows that the Las Vegas-headquartered miner stock matches the general recovery witnessed in the segment.
At 16:30 UTC, the miner’s stock is exchanging hands at $17.32, a 0.35% increase in the past 24 hours. Its market capitalization estimates $ at $2.93 billion, as per MarketWatch.
The stock trading under the ticker symbol MARA opened at $17.02 before sliding to the day’s lowest of $16.73. A review of the MarketWatch data shows the Nasdaq-listed stock regained to test a day’s high of 17.79. It portrays a remarkable recovery for a stock whose 52-week low hit $3.11. The miner’s stock appears destined to realize its 52-week high of $19.88.
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