Nasdaq-Listed Crypto Firm Accused Of Defrauding Investors With Fake Bitcoin Mining Business

A class-action lawsuit was filed on Wednesday in the Southern District Court of New York against Bit Digital Inc., its CEO Min Hu, and CFO Erke Huang.

Bit Digital, a holding company listed on Nasdaq under the symbol BTBT, purports to engage in bitcoin mining business through its U.S. and Hong Kong subsidiaries. Its name was changed from Golden Bull Ltd. (ticker DNJR) in September 2020.

The lawsuit cites a report by J Capital Research released on Jan. 11 alleging that Bit Digital operates “a fake cryptocurrency business,” which is “designed to steal funds from investors.”

J Capital alleges that Bit Digital’s claim that “it was operating 22,869 bitcoin miners in China” is “simply not possible.” The research firm stated that it had “verified with local governments supposedly hosting the BTBT mining operation that there are no bitcoin miners there,” adding “We think the bitcoin business BTBT discloses is completely fraudulent.”

Bit Digital had previously declared, “Our mining operations are in Wuhai, Zhundong, Xinlinhot and Sichuan, China.”

J Capital explained that “In China, you have to register with the government to have a data center, and local governments have records of all data centers and bitcoin mining operations.” The research firm further noted that “without a Chinese-registered entity, that would not be legal.” Moreover, “Companies are required to show a registration document from a domestic legal entity before they can sign a lease or a hosting contract. Yet the company clearly claims that it both operates and leases mining facilities in China.”

To verify Bit Digital’s claims, J Capital contacted the governments of these regions. “In telephone calls, local government officials of each locality told us they had no bitcoin mining operations and had not heard of Bit Digital,” J Capital described.

An official of Zhundong told J Capital: “Big data, cryptocurrency, cloud computing parks or data centers — none of these have registered here.” An official of Xilinhot also confirmed, “There is no bitcoin center here.” Similarly, an official of Wuhai told J Capital “There’s no bitcoin center here. I’ve never heard of Bit Digital.”

To verify that Bit Digital had the bitcoin miners it claims, J Capital said it spoke with “all the major manufacturers in China of bitcoin mining equipment” but “None had heard of BTBT.”

An employee of Microbt, a mining rig manufacturer from which BTBT said it bought 21,713 machines in 2020, told J Capital that BTBT had not purchased equipment from them. “I have never heard of Bit Digital,” he said. “We provided the name of the company’s former VIE with no better result,” J Capital clarified.

Bit Digital also said that it bought 256 miners from Bitmain in the first nine months of 2020. However, J Capital said that Bitmain “drew a blank” when inquired about BTBT.

Bitcoin (BTC) $ 66,539.83 5.89%
Ethereum (ETH) $ 3,214.08 8.87%
Tether (USDT) $ 1.00 0.13%
BNB (BNB) $ 576.63 6.07%
Solana (SOL) $ 149.57 13.81%
USDC (USDC) $ 1.00 0.10%
Lido Staked Ether (STETH) $ 3,203.03 8.98%
XRP (XRP) $ 0.539783 11.47%
Dogecoin (DOGE) $ 0.169226 13.82%
Toncoin (TON) $ 6.42 11.85%
$0.0000  $0.0000  (0.00%)
$0.0000  $0.0000  (0.00%)
$0.0000  $0.0000  (0.00%)
$0.0000  $0.0000  (0.00%)
$0.0000  $0.0000  (0.00%)
$0.0000  $0.0000  (0.00%)