Core Scientific Bitcoin Mining Examined For Alleged Fraud. New York-based law firm Pomerantz LLP (pomlaw.com) has launched an investigation into Bitcoin mining company Core Scientific over claims its leadership has engaged in securities fraud and activities that negatively impacted its share price.
Reporting from Yahoo Finance, Thursday (12/1/2023), Pomerantz said acting on behalf of the company’s investors said several officers and directors of Core Scientific had engaged in securities fraud or other unlawful business practices.
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More specifically, the securities firm cited a report last year by investment research firm Culper Research, which said Core had oversold both its mining and hosting businesses.
Not long ago, Core Scientific has filed for Chapter 11 Bankruptcy. The Austin-based company went public on the Nasdaq through a special purpose acquisition, or SPAC, in January 2022. By late December, when Core filed for Chapter 11 bankruptcy, the company’s stock had plunged more than 98 percent.
The Culper Research report was also cited in a November 2022 class action lawsuit, which alleges Core Scientific failed to disclose a series of adverse financial circumstances in its statements to shareholders.
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The Interests of Minority Shareholders Are Ignored
The report alleges Core waived a 180-day lockup period on more than 282 million shares, making them “free to dispose” in March 2022, suggesting company insiders have neglected minority shareholders.
Other examples of Core’s alleged fraudulent activities highlighted by Pomerantz include the company being accused by now-bankrupt crypto lender Celsius of adding inappropriate fees and knowingly and repeatedly violating its contractual obligations, which caused the company’s shares to fall.
Previously, US Senator John Boozman revealed that even though it is called a cryptocurrency, Bitcoin is still considered a commodity, not a currency. He emphasized that exchanges where commodities are traded, including bitcoin, must be regulated by the Commodity Futures Trading Commission (CFTC).
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“Bitcoin, even though it’s a cryptocurrency, it’s still a commodity. It’s a commodity in the eyes of federal courts and the opinion of the chairman of the Securities and Exchange Commission (SEC). There is no dispute about this,” Boozman said in a hearing, quoted from Bitcoin.com, Tuesday (6/12/2022).
Calling FTX’s collapse a shock, the senator said public reports showed a lack of risk management, conflicts of interest and misuse of customer funds.
Senator Boozman went on to talk about crypto regulation and empowering the Commodity Futures Trading Commission (CFTC) as the primary regulator of the spot crypto market.
“The CFTC has consistently demonstrated its willingness to protect consumers through enforcement action against bad actors,” continued Senator Boozman.
Boozman believes the CFTC is the right agency for an expanded regulatory role in the digital commodity spot market.
Core Scientific Bitcoin Mining Examined For Alleged Fraud. In August 2022, Boozman and several senators introduced the Digital Commodity Consumer Protection Act (DCCPA) to empower the CFTC with exclusive jurisdiction over the digital commodity spot market.
Two other bills have been introduced in Congress this year to make the derivatives regulator the primary watchdog for the crypto sector.
While bitcoin is a commodity, SEC Chairman Gary Gensler has repeatedly said most other crypto tokens are securities.
Previously, the US Government had launched a website for alleged scam victims of cryptocurrency exchange FTX founder Sam Bankman-Fried to communicate with law enforcement.
In an order late Friday, January 6, 2023, US District Judge Lewis Kaplan in Manhattan authorized federal prosecutors to use the website, and did not need to contact individual victims.
“FTX may owe money to more than 1 million people, making it impractical for authorities to contact individual victims,” prosecutors said, quoted from Channel News Asia, Monday (9/1/2023).
Federal law requires prosecutors to contact potential victims of crimes to inform them of their rights, including the right to obtain restitution, be heard in court and be protected from the accused.
“If you believe you may have been the victim of fraud by Samuel Bankman-Fried, aka SBF, please contact the victim coordinator or witness at the United States Attorney’s office,” the website reads. The website has been active on Friday afternoon.
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Bankman-Fried, 30, has pleaded not guilty to eight counts of wire fraud and conspiracy over the November FTX collapse. Prosecutors say he stole billions from FTX customer deposits to pay debts to his hedge fund, Alameda Research, and lied to investors about FTX’s financial condition.
The former billionaire admits to his risk management deficiencies, but says he does not hold himself criminally responsible.
Previously, according to onchain research, wallets connected to Sam Bankman-Fried(SBF), co-founder of FTX, transferred a large number of previously unreported transactions across various blockchains.
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The transfer was discovered by Conor Grogan, and while most of the transaction occurred on December 28. Despite that, there was some activity recently in the first few days of the new year.
A large number of SBF-linked tokens that are transferred to various blockchains. Movement is happening on blockchains like Polygon, BinanceSmart Chain (BSC), Arbitrum, and Avalanche. The address saw outward movement for coins such as MATIC, AVAX, USDC, USDT, BTCB, WBTC, SPELL, PTP, MDX, and many more.
“The SBF (or someone with access to their wallet) most likely transferred USD 10 million (Rp 156.3 billion) in previously unreported transactions on the Avalanche, BSC, Arbitrum, and Polygon blockchains,” Grogan wrote on Twitter. Bitcoin.com, Friday, January 6, 2023.
Grogan added that there was recent activity between 2 to 3 January 2023 with wallets receiving crypto worth USD 30 million (Rp 469 billion). So the total transfer of funds related to SBF in the last few days was USD 40 million (Rp. 625.4 billion).
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Core Scientific Bitcoin Mining Examined For Alleged Fraud. “I checked every address linked to SBF and checked other blockchains. The private key for ETH works on other EVM chains,” added Grogan.
In addition to Grogan’s tweet, onchain researcher Ergo tweeted about some FTX-related bitcoin movements on January 4, 2023. According to Ergo this is likely team activity going bankrupt.
