Motley Rice files amended complaint for Riot Blockchain shareholders alleging pump-and-dump scheme
A class of Riot Blockchain, Inc. shareholders, represented by Motley Rice, filed an amended complaint last month expanding on allegations that the company and several of its executive officers had orchestrated a pump-and-dump scheme designed to mislead shareholders about the company’s supposed transformation from a maker of veterinary products to a miner of cryptocurrency so that company insiders could reaped profits through insider stock sales and other related-party transactions.
Motley Rice was appointed Lead Counsel on Nov. 6, 2018, following the consolidation of two proposed securities fraud class actions related to the alleged misrepresentations the company made to shareholders.
Previously known as Bioptix Inc., Riot Blockchain changed its name in 2017 after announcing that the company was transforming itself from a manufacturer of veterinary products to focus instead on breaking into cryptocurrency mining. As news this purported change reached the public, company’s share value increased from $8 to more than $40. However, concerns about the truthfulness of the company’s claims quickly followed.
In February 2018, CNBC reported that Riot Blockchain made a series of “questionable moves” shortly after the change, including: company insiders allegedly selling of hundreds of thousands of shares worth millions of dollars within weeks of announcing the company’s ostensible change; paying more than $11 million in company stock to entities partly owned by company executives for cryptocurrency mining equipment actually worth only $2 million; and keeping investors in the dark by repeatedly canceling the company’s annual stockholders’ meeting.
The Lead Plaintiff alleges that Riot Blockchain initially piqued investor interest with its purported plans to capitalize off of the “$150 billion market opportunities for companies seeking to invest in blockchain technologies.” In reality, the amended complaint alleges, “the change in the Company’s focus … was in fact nothing more than a façade” to allow the company’s executives “to take advantage of investor enthusiasm over cryptocurrency to execute a pump-and-dump scheme.” The Lead Plaintiff alleges that the scheme was orchestrated by a former major shareholder, Barry Honig, a Florida investor who reaped millions of dollars of trading profits from this alleged pump-and-dump scheme.
Defendants in the litigation are Riot Blockchain; Michael Beeghley, the company’s former CEO; John O’Rourke, Beeghley’s successor and the company’s CEO and Chairman of the Board from Nov. 2017 until Sept. 2018; Jeffrey McGonegal, the company’s Chief Financial Officer from 2003 until February 2018; and Honig.
Notably, the U.S. Securities and Exchange Commission has charged Defendants Honig and O’Rourke with similar pump-and-dump schemes at several other publicly traded companies, and is currently engaged in an investigation into Honig and O’Rourke’s role in Riot Blockchain. This case is Takata v. Riot Blockchain, Inc. et al, No. 3:18-cv-02293, in the U.S. District Court for the District of New Jersey.
If you purchased common stock in Riot Blockchain between October 3 and September 6, 2018, you are automatically included in the class action and no affirmative action is required to join the case. Further information for class members will be made publicly available in due course.