`ARGO BLOCKCHAIN PLC, PETER WALL,
`ALEX APPLETON, MATTHEW SHAW,
`SARAH GOW, COLLEEN SULLIVAN, and
`MARIA PERRELLA,
`
`v.
`
`
`Defendants.
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`
`
`
`
`
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`Case 1:23-cv-00572-NRM-SJB Document 1 Filed 01/26/23 Page 1 of 33 PageID #: 1
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`
`
`
`AARON MURPHY, Individually and on
`Behalf of All Others Similarly Situated,
`
`
`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF NEW YORK
`
`
`Case No.
`
`
`CLASS ACTION COMPLAINT
`
`
`JURY TRIAL DEMANDED
`
`Plaintiff,
`
`Plaintiff Aaron Murphy (“Plaintiff”), individually and on behalf of all others similarly
`
`situated, by Plaintiff’s undersigned attorneys, for Plaintiff’s complaint against Defendants, alleges
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`the following based upon personal knowledge as to Plaintiff and Plaintiff’s own acts, and
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`information and belief as to all other matters, based upon, inter alia, the investigation conducted
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`by and through Plaintiff’s attorneys, which included, among other things, a review of the
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`Defendants’ public documents, conference calls and announcements made by Defendants, United
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`States (“U.S.”) Securities and Exchange Commission (“SEC”) filings, wire and press releases
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`published by and regarding Argo Blockchain plc (“Argo” or the “Company”), analysts’ reports
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`and advisories about the Company, and information readily obtainable on the Internet. Plaintiff
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`believes that substantial, additional evidentiary support will exist for the allegations set forth herein
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`after a reasonable opportunity for discovery.
`
`NATURE OF THE ACTION
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`1.
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`This is a federal securities class action on behalf of a class consisting of all persons
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`and entities other than Defendants that purchased or otherwise acquired: (a) Argo American
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`1
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`
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`Depository Shares (“ADSs”) pursuant and/or traceable to the Offering Documents (defined below)
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`issued in connection with the Company’s initial public offering conducted on or about September
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`23, 2021 (the “IPO” or “Offering”); and/or (b) Argo securities between September 23, 2021 and
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`October 10, 2022, both dates inclusive (the “Class Period”). Plaintiff pursues claims against the
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`Defendants under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange
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`Act of 1934 (the “Exchange Act”).
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`2.
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`Argo, together with its subsidiaries, purports to engage in the cryptocurrency
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`mining business worldwide, including the mining of Bitcoin or Bitcoin equivalents (together,
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`“BTC”).
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`3.
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`Argo maintains a fleet of thousands of BTC mining machines at facilities located
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`in Canada and Dickens County, Texas. The Company’s Texas facility is referred to as its “Helios”
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`facility.
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`4.
`
`On August 19, 2021, Argo filed a registration statement on Form F-1 with the SEC
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`in connection with the IPO, which, after several amendments, was declared effective by the SEC
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`on September 22, 2021 (the “Registration Statement”).
`
`5.
`
`On September 23, 2021, Argo filed a prospectus on Form 424B4 with the SEC in
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`connection with the IPO, which incorporated and formed part of the Registration Statement (the
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`“Prospectus” and, together with the Registration Statement, the “Offering Documents”).
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`6.
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`On or about September 23, 2021, pursuant to the Offering Documents, Argo
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`conducted the IPO, issuing 7.5 million ADSs to the public at the Offering price of $15 per ADS
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`for approximate proceeds of $105 million to the Company before expenses and after applicable
`
`underwriting discounts and commissions.
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`2
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`7.
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`The Offering Documents were negligently prepared and, as a result, contained
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`untrue statements of material fact or omitted to state other facts necessary to make the statements
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`made not misleading and were not prepared in accordance with the rules and regulations governing
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`their preparation. Additionally, throughout the Class Period, Defendants made materially false
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`and misleading statements regarding the Company’s business, operations, and prospects.
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`Specifically, the Offering Documents and Defendants made false and/or misleading statements
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`and/or failed to disclose that: (i) Argo was highly susceptible to and/or suffered from significant
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`capital constraints, electricity and other costs, and network difficulties; (ii) the foregoing issues
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`hampered, inter alia, Argo’s ability to mine BTC, execute its business strategy, meet its
`
`obligations, and operate its Helios facility; (iii) as a result, Argo’s business was less sustainable
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`than Defendants had led investors to believe; (iv) accordingly, Argo’s business and financial
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`prospects were overstated; and (v) as a result, the Offering Documents and Defendants’ public
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`statements throughout the Class Period were materially false and/or misleading and failed to state
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`information required to be stated therein.
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`8.
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`On June 7, 2022, Argo issued a press release providing an operational update, in
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`which it disclosed that it had mined approximately 25% fewer BTC in May 2022 compared to
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`April 2022 because of, inter alia, increased network difficulty, higher electricity prices, and the
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`curtailment of mining operations at its Helios facility.
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`9.
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`On this news, Argo’s ADS price fell $0.28 per ADS, or 4.4%, to close at $6.09 per
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`ADS on June 7, 2022.
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`10.
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`On October 7, 2022, Argo issued a press release “announc[ing] several strategic
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`actions that are intended to bring in additional capital to the business and ensure that the Company
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`has the working capital necessary to execute its current strategy and meet its obligations over the
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`3
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`next twelve months.” Argo stated that in addition to measures being undertaken to reduce costs
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`and preserve capital, the Company had signed a non-binding letter of intent with an affiliate of
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`New York Digital Investment Group (“NYDIG”) to amend an existing equipment financing
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`agreement, plans to sell 3,400 mining machines for cash proceeds of £6 million, and intends to
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`raise approximately £24 million via a proposed subscription with a strategic investor.
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`11.
`
`On this news, Argo’s ADS price fell $0.97 per ADS, or 23.26%, to close at $3.20
`
`per ADS on October 7, 2022.
`
`12.
`
`Then, on October 11, 2022, Argo issued a press release providing an operational
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`update, in which it announced that “[d]uring the month of September, Argo mined 215 [BTC]
`
`compared to 235 BTC in August 2022” which was “primarily due to a 12% increase in average
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`network difficulty during September.” Argo also stated that it “is continuing to curtail operations
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`at its Helios facility in Dickens County, Texas during periods of high electricity prices” and was
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`replacing the Company’s Chief Technology Officer (“CTO”).
`
`13.
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`On this news, Argo’s ADS price fell $0.27 per ADS, or 10.98%, to close at $2.19
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`per ADS on October 11, 2022.
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`14.
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`As of the time this Complaint was filed, Argo’s ADSs continue to trade below the
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`$15 per ADS Offering price, damaging investors.
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`15.
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`As a result of Defendants’ wrongful acts and omissions, and the precipitous decline
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`in the market value of the Company’s securities, Plaintiff and other Class members have suffered
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`significant losses and damages.
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`JURISDICTION AND VENUE
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`16.
`
`The claims asserted herein arise under and pursuant to Sections 11 and 15 of the
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`Securities Act (15 U.S.C. §§ 77k and 77o), and Sections 10(b) and 20(a) of the Exchange Act (15
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`4
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`U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17 C.F.R. §
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`240.10b-5).
`
`17.
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`This Court has jurisdiction over the subject matter of this action pursuant to 28
`
`U.S.C. § 1331, Section 22 of the Securities Act (15 U.S.C. § 77v), and Section 27 of the Exchange
`
`Act (15 U.S.C. § 78aa).
`
`18.
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`Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b) and Section
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`27 of the Exchange Act (15 U.S.C. § 78aa(c)) as the alleged misstatements entered and subsequent
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`damages took place in this Judicial District. Pursuant to Argo’s most recent annual report on Form
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`20-F, as of December 31, 2021, there were 468,082,335 of the Company’s ordinary shares
`
`outstanding. Argo’s ADSs, each representing ten of the Company’s ordinary shares, trade on the
`
`Nasdaq Stock Market (“NASDAQ”). Accordingly, there are presumably hundreds, if not
`
`thousands, of investors in Argo’s ADSs located in the U.S., some of whom undoubtedly reside in
`
`this Judicial District.
`
`19.
`
`In connection with the acts alleged in this Complaint, Defendants, directly or
`
`indirectly, used the means and instrumentalities of interstate commerce, including, but not limited
`
`to, the mails, interstate telephone communications, and the facilities of the national securities
`
`markets.
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`PARTIES
`
`20.
`
`Plaintiff, as set forth in the attached Certification, purchased or otherwise acquired
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`Argo ADSs pursuant and/or traceable to the Offering Documents issued in connection with the
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`IPO, and/or Argo securities during the Class Period, and suffered damages as a result of the
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`federal securities law violations and false and/or misleading statements and/or material omissions
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`alleged herein.
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`5
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`21.
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`Defendant Argo is organized under the laws of England and Wales with principal
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`executive offices located at 9th Floor, 16 Great Queen Street, London WC2B 5DG, England. The
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`Company’s ADSs and 8.75% Senior Notes due 2026 trade in an efficient market on the NASDAQ
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`under the ticker symbols “ARBK” and “ARBKL”, respectively.
`
`22.
`
`Defendant Peter Wall (“Wall”) has served as Argo’s Chief Executive Officer and a
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`Member of the Company’s Board of Directors (the “Board”) at all relevant times. Wall signed or
`
`authorized the signing of the Registration Statement filed with the SEC.
`
`23.
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`Defendant Alex Appleton (“Appleton”) has served as Argo’s Chief Financial
`
`Officer and a Member of the Board at all relevant times. Appleton signed or authorized the signing
`
`of the Registration Statement filed with the SEC.
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`24.
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`Defendants Wall and Appleton are sometimes referred to herein collectively as the
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`“Exchange Act Individual Defendants.”
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`25.
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`The Exchange Act Individual Defendants possessed the power and authority to
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`control the contents of Argo’s SEC filings, press releases, and other market communications. The
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`Exchange Act Individual Defendants were provided with copies of Argo’s SEC filings and press
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`releases alleged herein to be misleading prior to or shortly after their issuance and had the ability
`
`and opportunity to prevent their issuance or to cause them to be corrected. Because of their
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`positions with Argo, and their access to material information available to them but not to the public,
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`the Exchange Act Individual Defendants knew that the adverse facts specified herein had not been
`
`disclosed to and were being concealed from the public, and that the positive representations being
`
`made were then materially false and misleading. The Exchange Act Individual Defendants are
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`liable for the false statements and omissions pleaded herein.
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`6
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`26.
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`Argo and the Exchange Act Individual Defendants are sometimes referred to herein
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`collectively as the “Exchange Act Defendants.”
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`27.
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`Defendant Matthew Shaw (“Shaw”) has served as a Member of the Board at all
`
`relevant times. Shaw signed or authorized the signing of the Registration Statement filed with the
`
`SEC.
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`28.
`
`Defendant Sarah Gow (“Gow”) has served as a Member of the Board at all relevant
`
`times. Gow signed or authorized the signing of the Registration Statement filed with the SEC.
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`29.
`
`Defendant Colleen Sullivan (“Sullivan”) served as a Member of the Board at the
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`time of the IPO. Sullivan signed or authorized the signing of the Registration Statement filed with
`
`the SEC.
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`30.
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`Defendant Maria Perrella (“Perrella”) has served as a Member of the Board at all
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`relevant times. Perrella signed or authorized the signing of the Registration Statement filed with
`
`the SEC.
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`31.
`
`The Exchange Act Individual Defendants and Defendants Shaw, Gow, Sullivan,
`
`and Perrella are sometimes referred to herein collectively as the “Securities Act Individual
`
`Defendants.”
`
`32.
`
`As directors, executive officers, and/or major shareholders of the Company, the
`
`Securities Act Individual Defendants participated in the solicitation and sale of Argo ADSs in the
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`IPO for their own benefit and the benefit of the Company. The Securities Act Individual
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`Defendants were key members of the IPO working group and executives of the Company who
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`pitched investors to purchase the shares sold in the IPO.
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`33.
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`Argo and the Securities Act Individual Defendants are sometimes referred to herein
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`collectively as the “Securities Act Defendants.”
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`7
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`34.
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`The Exchange Act Defendants and the Securities Act Defendants are sometimes
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`collectively, in whole or in part, referred to herein as “Defendants.”
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`SUBSTANTIVE ALLEGATIONS
`
`Background
`
`35.
`
`Argo, together with its subsidiaries, purports to engage in the cryptocurrency
`
`mining business worldwide, including the mining of BTC.
`
`36.
`
`Argo maintains a fleet of thousands of BTC mining machines located in the
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`Company’s Baie Comeau and Mirabel facilities in Canada, as well as its Helios facility located in
`
`Dickens County, Texas.
`
`37.
`
`On August 19, 2021, Argo filed the Registration Statement on Form F-1 with the
`
`SEC in connection with the IPO, which, after several amendments, was declared effective by the
`
`SEC on September 22, 2021.
`
`38.
`
`On September 23, 2021, Argo filed the Prospectus on Form 424B4 with the SEC
`
`in connection with the IPO, which incorporated and formed part of the Registration Statement.
`
`39.
`
`On or about September 23, 2021, pursuant to the Offering Documents, Argo
`
`conducted the IPO, issuing 7.5 million ADSs to the public at the Offering price of $15 per ADS
`
`for approximate proceeds of $105 million to the Company before expenses and after applicable
`
`underwriting discounts and commissions.
`
`Materially False and Misleading Statements Issued in the Offering Documents
`
`40.
`
`The Offering Documents represented that Argo’s mining strategy purportedly
`
`involves “cost-effectively acquir[ing] the latest generation mining machines and install[ing] them
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`in North American facilities that utilize predominantly . . . inexpensive power” (emphases added).
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`8
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`41.
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`For example, the Offering Documents touted Argo’s commitment to investing in
`
`reliable, low-cost power, stating, in relevant part:
`
`Reliable, Low-Cost, Renewable Power. We believe the combination of increased
`mining difficulty, driven by greater hash rates, and the periodic adjustment of
`reward rates, such as the halving of Bitcoin rewards, will drive the increasing
`importance of power efficiency in cryptocurrency mining over the long term. As a
`result, we are focused on deploying our mining machines at locations with access
`to reliable, renewable power sources, as successfully doing so should enable us to
`reduce our power costs.
`
`
`(Emphasis in original.)
`
`
`42.
`
`The Offering Documents also stressed to investors the sustainability of Argo’s
`
`operations through the use of the Company’s “Smart Growth” strategy, which purportedly involves
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`“optimiz[ing] our mining by identifying and purchasing the most profitable mining machines with
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`industry-leading returns on investment and actively monitoring and adjusting the operation of
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`those machines to enhance their performance”, and that Defendants “believe this smart-growth
`
`strategy, including our commitment to mining efficiency and return on investment in mining
`
`machines, will enable us to build value over the long term.”
`
`43.
`
`Likewise, the Offering Documents touted Argo’s “fleet of more than 21,000
`
`machines mining Bitcoin and other cryptocurrencies [that] can generate more than 1,075
`
`petahash[1] per second,” and that, “[a]s of June 30, 2021, our total hashrate places us in the top 10
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`of publicly listed self-miners that report such data.”
`
`44.
`
`The Offering Documents also stated that “we recently acquired 160 acres of land
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`in western Texas with access to up to 800 MW of power where we are currently developing a
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`mining facility”—i.e., the Helios facility—that “is expected to support 100 MW of power capacity
`
`
`1 A petahash is a unit used to measure the computing power of bitcoin miners.
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`9
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`in the first half of 2022 as part of Phase 1 of development and an additional 100 MW of power
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`capacity upon completion of Phase 2 of development.”
`
`45. Moreover, the Offering Documents assured investors that Argo’s “investments in
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`mining facilities are designed to significantly expand our mining capacity and provide us with
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`meaningful control over our mining operations.”
`
`46.
`
`In addition, the Offering Documents made positive statements regarding the
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`historical sustainability of Argo’s operations, the attractiveness of its purported “appreciating”
`
`investments in BTC, and the Company’s ability to fund its operating expenses while retaining
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`meaningful growth, stating, in relevant part:
`
`Since inception, we have mined more than 4,515 Bitcoin and Bitcoin Equivalent
`for our own account through June 30, 2021. While we mine for cryptocurrency for
`sale in the ordinary course of business, we believe that cryptocurrency represents
`an attractive, appreciating investment opportunity, and as such we have historically
`held cryptocurrency assets that we do not otherwise sell to fund our operating
`expenses. On June 30, 2021, we held 1,268 Bitcoin and Bitcoin Equivalent valued
`at approximately £31,896,437 based on prices as of such date. Our total revenue
`was £31,085,716 in the six months ended June 30, 2021, representing a growth rate
`of 179% over £11,124,455 in the six months ended June 30, 2020. We generated
`net income of £7,213,997 and £523,074 in the six months ended June 30, 2021 and
`in 2020, respectively, and a net loss of £869,051 in 2019. We generated EBITDA
`of £15,979,822, £7,625,309 and £1,387,386 in the six months ended June 30, 2021,
`in 2020 and in 2019, respectively.
`
`47.
`
`The statements referenced in ¶¶ 40-46 were materially false and misleading because
`
`
`
`the Offering Documents were negligently prepared and, as a result, contained untrue statements of
`
`material fact or omitted to state other facts necessary to make the statements made not misleading
`
`and were not prepared in accordance with the rules and regulations governing their preparation.
`
`Specifically, the Offering Documents made false and/or misleading statements and/or failed to
`
`disclose that: (i) Argo was highly susceptible to and/or suffered from significant capital
`
`constraints, electricity and other costs, and network difficulties; (ii) the foregoing issues hampered,
`
`10
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`inter alia, Argo’s ability to mine BTC, execute its business strategy, meet its obligations, and
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`operate its Helios facility; (iii) as a result, Argo’s business was less sustainable than Defendants
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`had led investors to believe; (iv) accordingly, Argo’s business and financial prospects were
`
`overstated; and (v) as a result, the Offering Documents were materially false and/or misleading
`
`and failed to state information required to be stated therein.
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`Materially False and Misleading Statements Issued During the Class Period
`
`48.
`
`The Class Period begins on September 23, 2021, when Argo’s ADSs began publicly
`
`trading on the NASDAQ pursuant to the materially false or misleading statements or omissions
`
`contained in the Offering Documents, as referenced in ¶¶ 40-46, supra.
`
`49.
`
`On September 30, 2021, Argo issued a press release announcing that it had
`
`expanded the mining capacity of its future Helios facility through a purchase agreement for
`
`cryptocurrency mining machines that was partially funded by the Company’s cash reserves,
`
`stating, in relevant part:
`
`Argo . . . is pleased to announce that it has executed a purchase agreement for
`20,000 Bitmain Antminer S19J Pro machines, to be paid in periodic installments
`before final shipment. The initial deposit is currently being funded by the
`Company’s cash reserves. The machines are expected to increase Argo’s hashrate
`by over 2 Exahash and are expected to be delivered and installed at the Company’s
`future Texas facility in monthly batches from Q2 2022 through Q3 2022. Based on
`existing capacity and previous orders, Argo’s mining capacity is expected to be 1.7
`Exahash by mid-Q4 2021. This expansion will bring the Company’s total mining
`capacity to 3.7 Exahash by the end of Q3 2022.
`
`50.
`
`On November 1, 2021, Argo issued a press release announcing its third quarter
`
`
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`2021 results (the “3Q21 Press Release”). That press release assured investors regarding the
`
`continued sustainable growth of the Company’s BTC mining operations, stating, in relevant part:
`
`“From breaking ground on our sustainable cryptocurrency mining facility in
`Dickens County, Texas to our public listing on Nasdaq in the United States, this
`quarter has been pivotal as Argo continues to scale,” stated [Defendant] Wall, Chief
`Executive Officer of Argo Blockchain. “I am proud of the growth we experienced
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`11
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`during the quarter and believe Argo is strategically positioned to continue this
`momentum as we build out our Helios facility in Texas.”
`
`
`* * *
`
`
`During the third quarter, Argo mined 597 [BTC], bringing Argo’s BTC holding to
`1,836 as of September 30, 2021. Argo has been able to achieve these results while
`maintaining a gross margin of 120% and an industry-leading mining margin of 85%
`with an average direct cost per BTC mined of $6,293 (£4,673).
`
`51.
`
`The 3Q21 Press Release also stated that “[t]he new Helios facility will bolster
`
`Argo’s mining capacity” and “gives Argo access to up to 800 MW of electrical power[.]”
`
`52.
`
`On April 27, 2022, Argo issued a press release announcing its full year 2021 results
`
`(the “FY21 Press Release”). With respect to the Company’s operational highlights, the FY21 Press
`
`Release stated, in relevant part, that Argo had “[a]cquired the Helios project in Dickens County,
`
`Texas, which has an interconnection agreement for up to 800MW of power capacity”; that Argo
`
`“[a]cquired two data centres in Quebec (Mirabel and Baie Comeau) . . . with a combined total of
`
`20MW of power capacity”; that Argo “[p]urchased 20,000 Bitmain S19J Pro mining machines
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`with delivery and installation expected to occur in batches from May to October 2022”; and that
`
`Argo “[e]xpanded Bitcoin mining capacity from 0.6 Exahash per second (‘EH/s’) to 1.6 EH/s”; all
`
`of which indicated that the Company had significantly strengthened its BTC mining operations.
`
`53.
`
`The FY21 Press Release also provided the following financing highlights:
`
`
`
`
`
`
`
`In Q1, raised £49.2 million [$66.4 million] in new equity via private placement
`for investment in mining rigs, Texas development, blockchain/fintech ventures
`including a significant equity investment in Pluto Digital Assets plc, and
`working capital
`
`In Q3, raised £94.8 million [$127.9 million] in new equity via a public offering
`on the Nasdaq Global Select Market, which significantly expanded our investor
`reach by expanding access to the US capital markets
`
`In Q4, raised £29.6 million [$40.0 million] in unsecured debt through the
`issuance of senior notes traded on the Nasdaq Global Select Market
`
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`12
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`(Alterations in original.) These statements indicated that the Company had not only significantly
`
`strengthened its capital resources, but also had sufficient capital to meet existing debt obligations
`
`in addition to the new debt obligations it had entered into.
`
`54.
`
`In addition, the FY21 Press Release quoted Defendant Wall, who stated, in relevant
`
`part, that “Argo . . . accomplished key milestones to strengthen the foundation of the Group and
`
`position us for long-term success through the acquisition of the Helios project and our dual listing
`
`on Nasdaq”; that “[t]he acquisition of Helios provided us with the opportunity to build a best-in-
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`class, vertically-integrated facility with access to low-cost and sustainable electricity, which is
`
`unmatched by our peers” (emphasis added); and that “[w]ith our mining operations at Helios
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`expected to commence in May, along with the development of custom mining machines using
`
`Intel’s next-generation Blockscale ASIC chips, Argo is well-positioned to continue its growth with
`
`a focus on delivering for our shareholders.”
`
`55.
`
`On May 2, 2022, Argo filed an annual report on Form 20-F with the SEC, reporting
`
`the Company’s financial and operational results for the quarter and year ended December 31, 2021
`
`(the “2021 10-K”). With respect to Argo’s purportedly “cost-effective[]” and “inexpensive[ly]
`
`power[ed]” BTC mining operations and facilities, including the Helios facility, the 2021 10-K
`
`stated, in relevant part:
`
`Our mining strategy is to cost-effectively acquire and deploy the most advanced
`mining
`technology solutions
`in North American
`facilities
`that utilize
`predominantly . . . inexpensive power. As of December 31, 2021, we had a fleet of
`approximately 24,000 machines mining Bitcoin and other cryptocurrencies and can
`generate more than 1,605 petahash per second . . . . As of December 31, 2021, our
`total hashrate places us in the top 10 of publicly listed self-miners that report such
`data . . . . [W]e acquired 160 acres of land in western Texas with access to up to
`800 MW of power where we are currently developing a mining facility (“Helios”).
`The Helios facility is expected to support 200 MW of power capacity, and mining
`operations are expected to commence in May 2022. Our investments in mining
`facilities are designed to significantly expand our mining capacity and provide us
`with meaningful control over our mining operations.
`
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`Case 1:23-cv-00572-NRM-SJB Document 1 Filed 01/26/23 Page 14 of 33 PageID #: 14
`
`
`
`(Emphases added.)
`
`
`56. With respect to Argo’s purported strategy to use reliable, low-cost power for its
`
`mining operations, the 2021 10-K stated, in relevant part:
`
`By owning and operating our mining machines at facilities that offer competitive
`advantages, including access to reliable, low-cost, renewable power and room for
`expansion, we expect to have greater control over the timing of the purchase and
`deployment of our mining machines.
`
`
`* * *
`
`
`Power represents our highest variable direct cost for our mining operations, with
`electrical power required both to operate the mining machines and to dissipate the
`significant amount of heat generated by the machines’ operation . . . . [W]e are
`focused on deploying our mining machines at locations with access to reliable,
`renewable power sources, as successfully doing so should enable us to reduce our
`power costs . . . . [T]he Helios facility that we are currently building is located in
`the Texas Panhandle, where 85% of electricity generation capacity comes from
`wind power. At Helios, we anticipate that our net electricity costs will be below
`$0.02/kWh after including the benefits of participating in demand response
`programs offered by the Electric Reliability Council of Texas[.]
`
`
`(Emphases added.)
`
`
`57. With respect to Argo’s capital expenditures, the 2021 10-K stated, in relevant part:
`
`Historically, our capital expenditures have consisted primarily of purchasing
`mining machines and computer equipment and improvements to the mining
`facilities in which we operate. Our capital expenditures during the year ended
`December 31, 2020 were principally for purchasing mining machines. Beginning
`in 2021, in addition to the acquisition of mining machines, our capital expenditures
`have expanded to include acquiring and building mining facilities that we will own
`and operate. Our capital expenditures were £15.7 million, £9.2 million and £160.3
`million in 2019, 2020 and 2021, respectively. We expect significantly higher capital
`expenditures in the future, as we execute our strategy to own and operate our mining
`facilities.
`
`58.
`
`The 2021 10-K also continued to make positive statements regarding the historical
`
`sustainability of Argo’s operations, the attractiveness of its purported “appreciating” investments
`
`in BTC, and the Company’s ability to fund its operating expenses while retaining meaningful
`
`growth, stating, in relevant part:
`
`14
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`

`

`Case 1:23-cv-00572-NRM-SJB Document 1 Filed 01/26/23 Page 15 of 33 PageID #: 15
`
`
`
`
`
`Since inception, we have mined more than 5,840 Bitcoin and Bitcoin Equivalent
`for our own account through December 31, 2021. While we mine for
`cryptocurrency for sale in the ordinary course of business, we believe that
`cryptocurrency represents an attractive, appreciating investment opportunity, and
`as such we have historically held cryptocurrency assets that we do not otherwise
`sell to fund our operating expenses. On December 31, 2021, we held 2,595 Bitcoin
`and Bitcoin Equivalent valued at approximately £88.8 million based on prices as of
`such date. Our total revenue was £74.2 million in the year ended December 31,
`2021, representing a growth rate of 291% over £19 million in the year ended
`December 31, 2020. We generated net income of £30.8 million and £1.4 million in
`the year ended December 31, 2021 and December 31, 2020, respectively. We
`generated EBITDA of £52.9 million and £7.6 million in the year ended December
`31, 2021 and December 31, 2020, respectively.
`
`59.
`
`Appended as an exhibit to the 2021 10-K were signed certifications pursuant to the
`
`Sarbanes-Oxley Act of 2002, wherein the Exchange Act Individual Defendants certified that the
`
`2021 10-K “fully complies with the requirements of section 13(a) of the [Exchange Act] and
`
`information contained in the [2021 10-K] fairly presents, in all material respects, the financial
`
`condition and results of operations of Argo.”
`
`60.
`
`On May 5, 2022, Argo issued a press release announcing the “[e]nergization” and
`
`official opening of its Helios facility, stating, in relevant part:
`
`Phase 1 of Helios’ development will utilise 200 MW of power capacity and
`represents an increase of 243% in Argo’s hashrate to an anticipated 5.5 EH/s by the
`end of 2022 as the Company significantly scales up its mining operations.
`
`Helios also has access to up to an additional 600 MW of power capacity which the
`Company expects to utilise in the coming years through further phases of
`development at the site. It is anticipated this additional capacity, along with further
`development of the site, will enable Argo’s operations to grow significantly to more
`than 20 EH/s.
`
`Helios has been designed to house one of the largest immersion-cooled mining
`operations in the world, which is expected to be more cost-efficient, extend the life
`of the mining machines by reducing machine exposure to dust and debris and
`improve operational performance.
`
`
`(Emphasis added.)
`
`
`15
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`

`Case 1:23-cv-00572-NRM-SJB Document 1 Filed 01/26/23 Page 16 of 33 PageID #: 16
`
`
`
`61.
`
`On May 18, 2022, Argo issued a press release announcing its first quarter 2022
`
`results. That press release quoted Defendant Wall, who stated, in relevant part:
`
`To be a successful miner you need three components - power, miners, and capital.
`We already have a strong foundation for growth at Helios with our access to 800
`MW of power capacity. This quarter, we improved our access to capital by
`establishing a financing relationship with NYDIG and strengthened our access to
`miners through our supply agreement with Intel for their new Blockscale ASIC
`chips. This will allow us to build custom-designed mining machines specifically to
`Argo’s spec