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Former Executives Allege Fraud at Tether-Backed Crypto Group Northern Data

Published

5 months ago

7 July, 2024

Former Executives Allege Fraud at Tether-Backed Crypto Group Northern Data

Two former executives at Northern Data, a German-listed crypto and artificial intelligence infrastructure company backed by Tether, say they were fired after raising concerns about an alleged fraud they say was perpetrated by its CEO and COO.

In a complaint filed last month in California’s Central District Court, Joshua Porter and Gulsen Kama allege that Northern Data was “falsely misrepresenting the strength of its financial condition to investors, regulators and business partners” and “knowingly engaging in tax evasion potentially amounting to tens of millions of dollars.”

Northern Data said it “refutes the allegations in the strongest terms and will vigorously contest them to protect ourselves from false claims that harm our company and our business.”

Integrity is fundamental to Northern Data Group and its leadership. As a publicly traded company, we have comprehensive policies and procedures to ensure the accuracy of our financial reporting. Our 2022 accounts have received an unqualified audit opinion and we will shortly publish our 2023 audited financial statements.

Northern Data made headlines for other reasons this week, with Bloomberg News reports Monday that the company is considering an IPO in the United States for its AI-powered cloud computing and data center businesses:

Banks asked to bid for the role have suggested valuations of around $10 billion to $16 billion. That compares with [Northern Data’s] market capitalization of €1.3 billion ($1.4 billion) as of Monday’s close.

Potential advisers are basing the valuation range partly on Northern Data’s ties to Tether Group, people familiar with the matter said. Tether’s backing has facilitated the purchase of more than $800 million of high-end Nvidia Corp chips used in generative artificial intelligence applications.

Northern Bitcoin was launched in 2018 as a pure-play cryptocurrency miner, then changed its name to Northern Data as grown through acquisition in high-performance computing data centers. It plans to open cloud computing facilities in the United States and the United Kingdom to complement its eight crypto-mining sites, six of which are in North America.

Stablecoin issuer Tether owns 51 percent of Northern Data’s shares, after agreeing last year to a “strategic investment” which implied the exchange Nvidia GPUs for capital and a loan to shareholders. The former directors’ allegations predate his involvement.

Joshua Porter was named chief operating officer of Northern Data’s U.S. subsidiary in April 2022, then promoted to president and CEO of North America in January 2023. He was fired in March 2023 after raising concerns with his superiors that the company’s German parent company was “on the verge of insolvency,” a court filing dated June 21, 2024, states:

After receiving the promotion, Claimant Porter first began to have limited knowledge of Northern Data’s finances. Claimant Porter was shocked to discover that the company had a German tax liability of $30 million and additional liabilities of nearly $8 million, while simultaneously having only $17 million in cash on hand and a monthly burn rate of $3-4 million.

In addition to raising concerns about “the financial health of the company, its cash position and its solvency (or potential lack thereof)” with the management team, Porter also sought to expose what the complaint calls “rampant tax evasion” by Northern Data.

Accounting firm Deloitte declined to provide an option letter supporting Northern Data’s decision not to pay the IRS any taxes on cryptocurrency mining profits generated on U.S. soil, the plaintiffs allege. But instead of modifying its operating structure or tax treatment to avoid violating U.S. law, Northern Data “took steps to illegally evade U.S. taxes” for at least the 2021 fiscal year, the complaint says. It adds that Potter said the U.S. tax liability “could easily be in the tens of millions of dollars.””and that “an IRS audit could potentially cause Northern Data to go into insolvency.”

It was around this time that Aroosh Thillainathanco-founder and CEO of Northern Data, has stopped responding to Potter’s communications, they say:

Claimant Porter’s concerns fell on deaf ears, so he declared his intention to directly approach the Northern Data Board of Directors to alert them to the companies uncontrolled illegal activity. Shortly thereafter, in apparent retaliation for his whistleblowing activity, Claimant Porter was illegally terminated.

Gulsen Kama was appointed Chief Financial Officer for North America at Northern Data in July 2022 and was promoted to Group Deputy Chief Financial Officer approximately two months later.

The complaint continues:

Following her promotion, Plaintiff Kama was actively exposing and then attempting to prevent Defendants from misrepresenting their financial position to potential auditors, tax advisors, and investors. At various times, Plaintiff Kama raised concerns about the accounting and securities fraud she was uncovering with Northern Data’s Global CEO, COO, Chairman of the Supervisory Board, and Chief Legal and Compliance Officer, to no avail, because the CEO and COO were perpetuating the accounting and securities fraud.

The CEO and COO intended to deceive existing and potential investors at an upcoming meeting scheduled for June 12, 2023. As a result of Plaintiff Kama repeatedly informing and warning the responsible officers of the illegal acts that they were committing fraud, on or about June 8, 2023, Plaintiff Kama was retaliated against and unlawfully terminated from her employment for her whistleblowing activities.

According to the plaintiffs, Kama conducted meetings with KPMG, Northern Data’s auditor for its 2020 and 2021 financials. In February 2023, at a meeting to sign off on the 2022 numbers, KPMG “raised concerns about the company’s liquidity position as a going concern” and requested documentation, the complaint says.

In early May, since KPMG had not yet been hired as auditor, Thillainathan reportedly told Kama to look for another firm:

While he said he looked at the top 20-25 ranked auditors, he said he didn’t care if they were ranked that high because no one cares who the auditors were. He said KPMG was being difficult and unreasonable but the underlying order was that he wanted a firm that would do the audit no questions asked. Plaintiff Kama attempted to fight back but Thillainathan ordered her to do as she was told and told her point blank that her head was on the chopping block.

A month later, KPMG had still not signed the engagement letter and relations between Kama, Thillainathan and group chief operating officer Rosanne Kincaid-Smith had allegedly deteriorated.

Kama allegedly issued a special “hold” notice to the accounting and finance department, requiring historical records to be preserved and requiring staff to include it in all communications with the supervisory board. The next day, Kama’s employment was terminated, according to the complaint.

Shareholders voted to approve a capital increase at the group’s annual general meeting on the following Monday, June 12, 2023. This amounts to a pattern of fundraising “followed by the issuance of emphatic press releases to drive up the share price,” the plaintiffs allege.

Berenberg data shows Northern Data has raised money 13 times since December 2020. [Hi-res]

Zettahash is a wholly owned subsidiary of Tether © Berenberg

KPMG finally delivered its audit report on Northern Data’s 2022 financials in March 2024, highlighting “material uncertainty about the group’s ability to continue as a going concern” due to its reliance on bitcoin sales and lending to Tether shareholders.

The company last week delayed the publication of its 2023 audited financial statements to July 12thHe had previously said the report would be released by the end of the first half of 2024.

Its new auditor is Liebhart & Kollegen, according to a Regulatory filing May 2024. Liebhart describes himself in his LinkedIn Profile as a law firm with a single office in Stuttgart and “almost 15 team members.” He was contacted for comment.

KPMG and Tether did not respond to our requests for comment on the lawsuit.

In May, Northern Data successfully petitioned the court to have portions of the complaint redacted, arguing that they constitute “confidential and privileged communications protected by the attorney-client privilege and the attorney’s work product doctrine.” This week, the plaintiffs argued in a warehouse who reserved the right to contest the sealing order.

Here are the links for the complaint in court AND the sealing request.

Correction: An earlier version of this story stated that Northern Data had aimed to release its 2023 audited results by Q4 2023. The target was for 2022 results and the reference has been removed.

The story has been updated to include Northern Data’s statement.

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News

Cryptocurrency Price August 1: Bitcoin Dips Below $65K; Solana, XRP Down Up To 8%

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Major cryptocurrencies fell in Thursday trading following the Federal Reserve’s decision to keep its key interest rate unchanged. Overnight, the U.S. Federal Reserve kept its key interest rate at 5.25-5.5% for the eighth consecutive time, as expected, while also signaling the possibility of a rate cut at its next meeting in September. The unanimous decision by the Federal Open Market Committee reflects a continued wait-and-see approach as it monitors inflation trends.

CoinSwitch Markets Desk said: “Bitcoin has fallen below $65,000 after the US Federal Reserve announced it would keep interest rates unchanged. However, with markets now anticipating rate cuts at the next Federal Reserve meeting in September, the outlook for a Bitcoin rally by the end of the year has strengthened.”

Meanwhile, CoinDCX research team said: “The crypto market has plunged after the Fed decision. Tomorrow’s US unemployment rate announcement is expected to induce more volatility, with the ‘actual’ figure coming in higher than the ‘expected’ one, which is positive for cryptocurrencies.”

At 12:21 pm IST, Bitcoin (BTC) was down 3.2% at $64,285, while Ethereum was down nearly 4.5% at $3,313. Meanwhile, the global market cryptocurrency The market capitalization fell 3.6% to around $2.3 trillion in the last 24 hours.

“Bitcoin needs to clear its 200-day EMA at $64,510 to consolidate further. Otherwise, a retest of $62,000 could be in the cards,” said Vikram Subburaj, CEO of Giottus.

Altcoins and meme coins, such as BNB (3%), Solana (8%), XRP (5.7%), Dogecoin (5%), Cardano (4.6%), Avalanche (4.3%), Shiba Inu (3.8%), Polkadot (3.4%), and Chainlink (4%) also saw declines.

The volume of all stablecoins is now $71.64 billion, which is 92.19% of the total cryptocurrency market volume in 24 hours, according to data available on CoinMarketCap. Bitcoin’s dominance is currently 54.99%. BTC volume in the last 24 hours increased by 23.3% to $35.7 billion.

(Disclaimer: Recommendations, suggestions, opinions and views provided by experts are personal. They do not represent the views of the Economic Times)

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Altcoins WIF, BONK, RUNE, JUP Down 10% While Bitcoin Drops 4%

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Altcoins WIF, BONK, RUNE and JUP drop 10% as Bitcoin recedes 4%

Altcoins dogwifhat, Bonk, THORChain, and Jupiter have suffered losses of more than 10%, while Bitcoin is down 4% in the last 24 hours.

After a period of relative calm yesterday, July 31, Bitcoin (BTC) price action has seen a drastic change as the cryptocurrency dropped by more than $3,500, bringing its value to $63,300. At the same time, altcoins mirrored this trend, with the total value of liquidated positions rising to nearly $225 million over the course of the day.

Initially, the week started on a positive note for Bitcoin, which reached its highest point since early June, hitting $70,000. However, this peak was short-lived, as it was quickly rejected, leading to a substantial decline, with Bitcoin falling below $65,500.

The cryptocurrency managed to regain some stability, trading comfortably at around $66,800. However, following a Press conference According to Federal Reserve Chairman Jerome Powell, the value of Bitcoin has fallen again to $64,300, down more than 3% in 24 hours.

BTC Price Chart 24 Hours | Source: crypto.news

The recession coincided with a relationship from the New York Times stating that Iran had called for retaliatory measures against Israel following the assassination of Hamas leader Ismail Haniyeh in Tehran, increasing the risk of further conflict in the region.

Meanwhile, on the economic front, the Federal Reserve decided to keep its benchmark interest rates in place, offering little information on a planned September rate cut. Powell also hinted that while no concrete decisions have been made on the September adjustment, there is growing consensus that a rate cut is likely.

Amid Bitcoin’s decline, altcoins have suffered even more significant losses. For example, dogwifhat (Wife) saw a 12.4% drop and (DISGUST) has suffered a 10% drop. Other altcoins such as THORChain (RUNE) also fell by 10%, while Jupiter (JUPITER) and the Ethereum naming service (ENS) decreased by 8% and 9% respectively.

Among the largest-cap cryptocurrencies, the biggest losers are Solana (SOL) with a decrease of 8%, (Exchange rate risk) down 6%, Cardano (ADA) down 4%, and both Ethereum (ETH) and Dogecoin (DOGE) recording a decrease of 4.4%.

Data from CoinGlass indicates that approximately 67,000 traders have been negatively impacted by this increased volatility. BTC positions have seen $61.85 million in liquidations, while ETH positions have faced $61 million. In total, the value of liquidated positions stands at $225.4 million at the time of writing.

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Riot Platforms Sees 52% Drop in Bitcoin Production in Q2

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Riot Platforms posts 52% decrease in Bitcoin production for Q2

Bitcoin mining firm Riot Platforms has released its second-quarter financial results, highlighting a decline in cryptocurrency mined due to the recent halving.

Colorado-based Bitcoin (BTC) mining company Riot platforms revealed its second quarter financial results, highlighting a significant reduction in mined cryptocurrencies attributed to the recent halving event that took place in early April.

The company reported total revenue of $70 million for the quarter ended July 31, a decline of 8.7% compared to the same period in 2023. Riot Platforms attributed the revenue decline primarily to a $9.7 million decrease in engineering revenue, which was partially mitigated by a $6 million increase in Bitcoin extraction income.

During the quarter, the company mined 844 BTC, representing a decline of over 50% from Q2 2023, citing the halving event and increasing network difficulty as major factors behind the decline. Riot Platforms reported a net loss of $84.4 million, or $0.32 per share, missing Zacks Research forecast a loss of $0.16 per share.

Halving increases competitive pressure

The Colorado-based firm said the average cost of mining one BTC in the second quarter, including energy credits, rose to $25,327, a remarkable 341% increase from $5,734 per BTC in the same quarter of 2023. Despite this significant increase in production costs, the firm remains optimistic about maintaining competitiveness through recent deals.

For example, following the Recent acquisition Cryptocurrency firm Block Mining, Riot has increased its distributed hash rate forecast from 31 EH/s to 36 EH/s by the end of 2024, while also increasing its 2025 forecast from 40 EH/s to 56 EH/s.

Riot Platforms Hashrate Growth Projections by 2027 | Source: Riot Platforms

Commenting on the company’s financials, Riot CEO Jason Les said that despite the halving, the mining company still managed to achieve “significant operational growth and execution of our long-term strategy.”

“Despite this reduction in production available to all Bitcoin miners, Riot reported $70 million in revenue for the quarter and maintained strong gross margins in our core Bitcoin mining business.”

Jason Les

Following its Q2 financial report, Riot Platforms shares fell 1.74% to $10.19, according to Google Finance data. Meanwhile, the American miner continues to chase Canadian rival Bitfarms, recently acquiring an additional 10.2 million BITF shares, increasing its stake in Bitfarms to 15.9%.

As previously reported by crypto.news, Riot was the first announced a $950 million takeover bid for Bitfarms in late May, arguing that Bitfarms’ founders were not acting in the best interests of all shareholders. They said their proposal was rejected by Bitfarms’ board without substantive engagement.

In response, Bitfarms She said that Riot’s offer “significantly understates” its growth prospects. Bitfarms subsequently implemented a shareholder rights plan, also known as a “poison pill,” to protect its strategic review process from hostile takeover attempts.

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Aave Price Increases Following Whales Accumulation and V3.1 Launch

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Aave price surges amid whale accumulation and V3.1 launch

Decentralized finance protocol Aave is seeing a significant spike in whale activity as the market looks to recover from the recent crash that pushed most altcoins into key support areas earlier this week.

July 31, Lookonchain shared details indicating that the whales had aggressively accumulated Aave (AAVE) over the past two days. According to the data, whales have withdrawn over 58,848 AAVE worth $6.47 million from exchanges during this period.

In one instance, whale address 0x9af4 withdrew 11,185 AAVE worth $1.23 million from Binance. Meanwhile, another address moved 21,619 AAVE worth over $2.38 million from the exchange and deposited the tokens into Aave.

These withdrawals follow a previous transfer of 26,044 AAVE from whale address 0xd7c5, amounting to over $2.83 million withdrawn from Binance.

AAVE price has surged over 7% in the past 24 hours amid buy-side pressure from these whales. The DeFi token is currently trading around $111 after jumping over 18% in the past week.

Recently, the price of AAVE increased by over 8% after Aave founder Marc Zeller announced a proposed fee change aimed at adopting a buyback program for AAVE tokens.

Aave v3.1 is available

The total value locked in the Aave protocol currently stands at around $22 billion. According to DeFiLlamaApproximately $19.9 billion is on Aave V3, while the V2 chain still holds approximately $1.9 billion in TVL and V1 approximately $14.6 million.

Aave Labs announced Previously, Aave V3.1 was made available on all networks with active Aave V3 instances.

V3.1 features improvements that are intended to improve the overall security of the DeFi protocol. The Aave DAO governance has approved the v3.1 improvements, which also include operational efficiency and usability for the network.

Meanwhile, Aave Labs recently outlined a ambitious roadmap for the projectwith a 2030 vision for Aave V4, among other developments.

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