Riot Blockchain, Inc. has been slapped with three nationwide class action lawsuits accusing the company of securities fraud and violated federal securities laws and misled shareholders.
At least five securities litigation firms have filed separate class action lawsuits this week in New Jersey federal court against the biotech turned cryptocurrency company. Specifically, the lawsuit claims that Riot Blockchain executives “made materially false and misleading statements about the company’s business, operational and compliance policies.”
Formerly known as Bioptix and basically going under, Chairman and CEO John O’Rourke changed the name of the company to Riot Blockchain on October 4, 2017, reportedly to cash in on the cryptocurrency boom, even though the company had no prior experience in the arena.
Cryptocurrencies have been no stranger to the media as of late with Bitcoin, Ethereum, and others making daily headlines. Blockchain technology, which was invented for Bitcoin, is a digital ledger that allows for decentralized record management of transactions within a global network. It is not illegal for a company to capitalize on trends such as the cryptocurrency industry, but the way Riot Blockchain executed its change has raised major concerns among its shareholders.
Right after Bioptix changed its name to Riot Blockchain in October 2017, company shares skyrocketed 372 percent in just two months to $38.60, and then closing at $17.20 on February 15, 2018. However, on February 16, 2018, CNBC aired an investigative report pointing out several “red flags” with the company’s newfound, instant success after such a faltering past spanning years.
Among these allegations was that Riot Blockchain failed to disclose that its principle executive offices were not in Colorado but instead in Florida, which happens to be the same location as Barry Honig – a major shareholder who has a long-documented business relationship with O’Rourke. Additionally, the report claims that Riot Blockchain intentionally postponed its Annual General Meetings twice before cancelling altogether. These questionable actions, according to the Riot Blockchain class action lawsuit, have rendered statements about Riot’s business practices as “materially false and misleading and/or lacked a reasonable basis at all relevant times.”
O’Rourke publicly denounced the CNBC report in a letter to shareholders, asserting that to his knowledge Riot Blockchain was “the first Nasdaq listed company to have blockchain in its name and [he] had no idea what the market reaction would be when the transition was made.”
“I feel obligated to state unequivocally that pivoting away from these legacy ventures to Riot Blockchain was the right course,” O’Rourke wrote. “It is not uncommon for businesses to pivot and change their business strategy. Amazon started off selling books.” O’Rourke also claims shareholders were warned about the risks about moving the company into the cryptocurrency mining area.
The Riot Blockchain class action lawsuits have been filed on behalf of Riot Blockchain shareholders who purchased shares between November 13, 2017 and February 15, 2018 and seek to recover damages for the company’s investors. Investors who would like to serve as a lead plaintiff must contact the Court by April 18, 2018.
The five securities law firms that have filed the Riot Blockchain class action lawsuits are US Market Advisors Law Group PLLC, Brower Piven APC, Block & Leviton LLP, Wolf Haldenstein Adler Freeman & Hertz LLP, and Rosen Law Form PA.