Shareholders Launch Lawsuit Against Marathon’s Top Management

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Key takeaways:

  • Marathon Digital is going to court after its shareholders claimed that top officials violated fiduciary obligations.
  • Five claims have been made against the firm’s executives.

Marathon Digital, an American cryptocurrency mining company, is going to court after its shareholders claimed that CEO Fred Thiel and other top officials had violated fiduciary obligations, unfairly benefited themselves, and wasted company resources.

On July 8, a shareholder complaint was submitted to the United States District Court for the District of Nevada against Fred Thiel and nine other Marathon officials. 

Five claims have been made against the firm’s executives. Infractions of the U.S. Securities Exchange Act, breaches of fiduciary obligations, unjust enrichment, and mismanagement of business assets are a few of them.

The plaintiffs also demand a potential payment from Thiel, Merrick Okamoto, Simeon Salzman, and Hugh Gallagher for wrongdoing that resulted in a Securities and Exchange Commission (SEC) complaint being filed against the defendant. The legal team defending the shareholders didn’t ask the defendants for a precise amount, leaving the level of compensation up to the court.

Additionally, the shareholders want to improve the board’s oversight of operations, nominate at least four shareholder candidates for the board, and do away with the former method of electing directors.

According to the legal team, the company’s management has been downplaying its issues, artificially inflating Marathon’s valuation, obtaining excessive remuneration, making profitable insider transactions, and receiving unjustifiably increased incentives based on false and deceptive representations.

Theil presented strategies for lowering the deficit from $12.9 million ($0.12 per share) in Q1 2022 to $7.2 million ($0.05 per share) this year.

The SEC sent a subpoena to Marathon in May “relating to, among other things, transactions with related parties” that took place as it was constructing its plant in Montana. Earlier, in 2021, the regulator had asked the company to provide conversations and documents for the same mining plant.

Marathon was able to lower its debt in March, despite the fact that the price of Bitcoin also had an impact on the company’s quarterly earnings. The mining company cleared the 3,132 BTC used as security for a term loan with Silvergate Bank by paying off the debt. Marathon said that the action would eliminate $50 million in debt and $5 million in yearly borrowing costs.

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