Crypto mining company Marathon Digital is facing a lawsuit from some shareholders alleging that CEO Fred Thiel and other top executives committed breaches of fiduciary duty, unjust enrichment, and squandering of corporate assets.
On July 8, a shareholder complaint against Fred Thiel and nine other Marathon executives was lodged in Nevada’s United States District Court. Five claims are being used to prosecute the company executives, including:
- Infractions of the U.S. Exchange Act.
- Breach of fiduciary duties.
- Unjust enrichment.
- Waste of corporate assets.
The plaintiffs are also seeking retribution against Thiel, Okamoto, Salzman, and Gallagher for their roles in the Securities and Exchange Commission (SEC) complaint filed against the company.
The legal team representing shareholders did not request specific compensation from the defendants, leaving that decision to the court.
The shareholders also intend to correct the company’s governance by enhancing the Board’s oversight of operations, nominating at least four shareholders to the Board, and eradicating the previous method of director elections.
According to the legal team, the company’s management has been downplaying its problems, artificially inflating Marathon’s valuation, receiving excessive compensation, engaging in lucrative insider sales, and unjustifiably inflated bonuses based on false and misleading statements.
In May, Marathon received a subpoena from the SEC “relating to, among other things, transactions with related parties” that took place during the construction of the Montana facility.
Before that, in 2021, the regulator mandated the production of documents and communications for the same mining facility.
In May, however, Thiel was optimistic when he described the company’s strategy for reducing its net loss from $12.9 million ($0.12 per share) in Q1 2022 to $7.2 million ($0.05 per share) this year.
Despite the impact of Bitcoin’s price on the company’s quarterly results, Marathon reduced its debt in March. The mining company repaid a term loan with Silvergate Bank, releasing the 3,132 Bitcoin pledged as collateral.
Marathon stated then that the action would eradicate $50 million in debt and reduce its annual borrowing costs by $5 million.
