Case 1:21-cv-00515 Document 1 Filed 01/20/21 Page 1 of 22
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`ANTHONY PAUWELS, Individually and
`On Behalf of All Others Similarly Situated,
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`
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`
`
`BIT DIGITAL, INC., MIN HU, and ERKE
`HUANG,
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` Case No.
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`CLASS ACTION COMPLAINT FOR
`VIOLATIONS OF THE FEDERAL
`SECURITIES LAWS
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`JURY TRIAL DEMANDED
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`Plaintiff,
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`Defendants.
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`v.
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`Case 1:21-cv-00515 Document 1 Filed 01/20/21 Page 2 of 22
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`Plaintiff Anthony Pauwels (“Plaintiff”), individually and on behalf of all others similarly
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`situated, by and through his attorneys, alleges the following upon information and belief, except
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`as to those allegations concerning Plaintiff, which are alleged upon personal knowledge. Plaintiff’s
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`information and belief is based upon, among other things, his counsel’s investigation, which
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`includes without limitation: (a) review and analysis of regulatory filings made by Bit Digital, Inc.
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`(“Bit Digital” or the “Company”) with the United States (“U.S.”) Securities and Exchange
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`Commission (“SEC”); (b) review and analysis of press releases and media reports issued by and
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`disseminated by Bit Digital; and (c) review of other publicly available information concerning Bit
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`Digital.
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`NATURE OF THE ACTION AND OVERVIEW
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`1.
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`This is a class action on behalf of persons and entities that purchased or otherwise
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`acquired Bit Digital securities between December 21, 2020 and January 8, 2021, inclusive (the
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`“Class Period”). Plaintiff pursues claims against the Defendants under the Securities Exchange
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`Act of 1934 (the “Exchange Act”).
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`2.
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`Bit Digital is a holding company that purports to engage in the bitcoin mining
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`business through its wholly owned subsidiaries in U.S. and Hong Kong.
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`3.
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`On January 11, 2021, J Capital Research issued a research report alleging, among
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`other things, that Bit Digital operates “a fake crypto currency business” “designed to steal funds
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`from investors.” Though the Company claims “it was operating 22,869 bitcoin miners in China,”
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`J Capital alleged that “is simply not possible” and stated that “[w]e verified with local governments
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`supposedly hosting the BTBT mining operation that there are no bitcoin miners there.”
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`4.
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`On this news, Bit Digital’s stock price fell $6.27 per share, or 25%, to close at
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`$18.76 per share on January 11, 2021, on unusually heavy trading volume.
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`CLASS ACTION COMPLAINT
`1
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`Case 1:21-cv-00515 Document 1 Filed 01/20/21 Page 3 of 22
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`5.
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`Throughout the Class Period, Defendants made materially false and/or misleading
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`statements, as well as failed to disclose material adverse facts about the Company’s business,
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`operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that Bit
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`Digital overstated the extent of its a bitcoin mining operation; and (2) that, as a result of the
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`foregoing, Defendants’ positive statements about the Company’s business, operations, and
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`prospects were materially misleading and/or lacked a reasonable basis.
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`6.
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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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`7.
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`The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange
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`Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17
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`C.F.R. § 240.10b-5).
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`8.
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`This Court has jurisdiction over the subject matter of this action pursuant to 28
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`U.S.C. § 1331 and Section 27 of the Exchange Act (15 U.S.C. § 78aa).
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`9.
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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)). Substantial acts in furtherance of the alleged fraud
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`or the effects of the fraud have occurred in this Judicial District. Many of the acts charged herein,
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`including the dissemination of materially false and/or misleading information, occurred in
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`substantial part in this Judicial District. In addition, the Company’s principal executive offices are
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`located in this District.
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`10.
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`In connection with the acts, transactions, and conduct alleged herein, Defendants
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`directly and indirectly used the means and instrumentalities of interstate commerce, including the
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`CLASS ACTION COMPLAINT
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`Case 1:21-cv-00515 Document 1 Filed 01/20/21 Page 4 of 22
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`United States mail, interstate telephone communications, and the facilities of a national securities
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`exchange.
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`PARTIES
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`11.
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`Plaintiff Anthony Pauwels, as set forth in the accompanying certification,
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`incorporated by reference herein, purchased Bit Digital securities during the Class Period, and
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`suffered damages as a result of the federal securities law violations and false and/or misleading
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`statements and/or material omissions alleged herein.
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`12.
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`Defendant Bit Digital is incorporated under the laws of Cayman Islands with its
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`principal executive offices located in Flushing, New York. Bit Digital’s shares trade on the
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`NASDAQ exchange under the symbol “BTBT.”
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`13.
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`Defendant Min Hu (“Hu”) was the Company’s Chief Executive Officer (“CEO”)
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`at all relevant times.
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`14.
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`Defendant Erke Huang (“Huang”) was the Company’s Chief Financial Officer
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`(“CFO”) at all relevant times.
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`15.
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`Defendants Hu and Huang (collectively the “Individual Defendants”), because of
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`their positions with the Company, possessed the power and authority to control the contents of the
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`Company’s reports to the SEC, press releases and presentations to securities analysts, money and
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`portfolio managers and institutional investors, i.e., the market. The Individual Defendants were
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`provided with copies of the Company’s reports and press releases alleged herein to be misleading
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`prior to, or shortly after, their issuance and had the ability and opportunity to prevent their issuance
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`or cause them to be corrected. Because of their positions and access to material non-public
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`information available to them, the Individual Defendants knew that the adverse facts specified
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`herein had not been disclosed to, and were being concealed from, the public, and that the positive
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`CLASS ACTION COMPLAINT
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`representations which were being made were then materially false and/or misleading. The
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`Individual Defendants are liable for the false statements pleaded herein.
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`SUBSTANTIVE ALLEGATIONS
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`Background
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`16.
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`Bit Digital is a holding company that purports to engage in the bitcoin mining
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`business through its wholly owned subsidiaries in U.S. and Hong Kong.
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`Materially False and Misleading
`Statements Issued During the Class Period
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`17.
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`The Class Period begins on December 21, 2020. On that day, the Company
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`announced its revised third quarter 2020 financial results in a press release that stated:
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`Financial Highlights for the Third Quarter 2020
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` Revenue from bitcoin mining business was $7.91 million.
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` The number of bitcoins earned from bitcoin mining business was 739.51.
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` The number of miners was 22,869, with 16,865 miners acquired in the
`third quarter 2020.
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` The net income from continuing operations of $0.10 million was all from
`bitcoin mining business, compared to the net loss of $1.79 million for the
`third quarter 2019.
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` The net loss from discontinued operations was $0.10 million for the third
`quarter 2020, as we disposed of peer-to-peer and car rental business in the
`PRC, compared with the net loss from discontinued operations of $1.22
`million for the third quarter 2019.
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` The net income was $54 and the earnings per share was $0.00 for the third
`quarter 2020, compared with the net loss of $3.0 million and loss per share
`of $0.20 for the same period last year.
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`Financial Highlights for the Nine Months 2020
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` Revenue from bitcoin mining business was $8.60 million.
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` The number of bitcoins earned from bitcoin mining business was 814.23.
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`CLASS ACTION COMPLAINT
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` The number of miners was 22,869, all miners acquired in the nine months
`2020.
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` The net loss from continuing operations of $0.73 million was all from
`bitcoin mining business, compared to $1.79 million for the nine months
`2019.
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` The net loss from discontinued operations was $3.83 million for the nine
`months 2020, as we provided full impairment on assets for our discontinued
`peer-to-peer and car rental business in the PRC, compared with the net loss
`from discontinued operations of $7.68 million for the nine months 2019.
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` The net loss was $4.56 million and the loss per share was $0.18 for the nine
`months 2020, compared with $9.47 million and $0.63 for the same period
`last year.
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`*
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`*
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`*
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`As of September 30, 2020, our hash rate reached 1,250 Ph/s. In December 2020,
`we closed an asset acquisition of 17,996 bitcoin miners with total hash rate of
`1,003.5 Ph/s, worth of $13,902,742, at a consideration of issuance of an aggregate
`of 4,344,711 common shares, par value $0.01 per share, at a per share price of
`$3.20. The closing of the acquisition increased the Company’s total hash rate by
`approximately 1,003.5 Ph/s, from 1,250 Ph/s to 2,253.5 Ph/s. The average energy
`efficiency of these miners is 47.45 (+/-5%) joules per terahash (J/TH). With these
`miners being fully deployed, the total energy efficiency is expected to be decreased
`from 61.88 (+/-5%) J/TH to 55.33 (+/-5%) by 10.59%, consuming 124 megawatts
`of power. The total 17,996 miners acquired in December 2020 were comprised of
`7,025 Antminer S17+, 9,110 Antminer T17, 195 Antminer S17E, 32 Antminer
`S17Pro, 105 Antminer S19Pro, 1,429 Whatsminer M20S and 100 Whatsminer
`M31S.
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`As of the date of this Report, we had a total of 40,865 miners, including 7,025
`Antminer S17+, 195 Antminer S17E, 32 Antminer S17Pro, 105 Antminer S19Pro,
`800 Antminer T3, 9,110 Antminer T17, 256 Antminer T17+, 2,200 Whatsminer
`M10, 4,125 Whatsminer M20S, 16,917 Whatsminer M21S and 100 Whatsminer
`M31S, spreading over Xinjiang, Inner Mongolia and Sichuan Provinces, PRC and
`Texas and Nebraska in the United States.
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`By December 18, 2020, we have earned an aggregation of 1,331.2 bitcoins and
`recognized unaudited revenues of approximately $16.50 million.
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`18.
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`The above statements identified in ¶ 17 were materially false and/or misleading,
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`and failed to disclose material adverse facts about the Company’s business, operations, and
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`prospects. Specifically, Defendants failed to disclose to investors: (1) that Bit Digital overstated
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`CLASS ACTION COMPLAINT
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`Case 1:21-cv-00515 Document 1 Filed 01/20/21 Page 7 of 22
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`the extent of its a bitcoin mining operation; and (2) that, as a result of the foregoing, Defendants’
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`positive statements about the Company’s business, operations, and prospects were materially
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`misleading and/or lacked a reasonable basis.
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`Disclosures at the End of the Class Period
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`19.
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`On January 11, 2021, J Capital Research issued a research report alleging, among
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`other things, that Bit Digital operates “a fake crypto currency business” “designed to steal funds
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`from investors.” Though the Company claims “it was operating 22,869 bitcoin miners in China,”
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`J Capital alleged that “is simply not possible” and stated that “[w]e verified with local governments
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`supposedly hosting the BTBT mining operation that there are no bitcoin miners there.”
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`Specifically, the report stated:
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`Fraudulent “mining” operations
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`We think the bitcoin business BTBT discloses is completely fraudulent.
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`In September 2020, BTBT changed its company name from Golden Bull Limited
`to Bit Digital, Inc. and its ticker from DNJR to BTBT. It announced it would be
`going into bitcoin mining. But without a Chinese-registered entity, that would not
`be legal. 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[.]
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`BTBT disclosed that, until September 2020, all its bitcoin mining operations were
`in China.
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`“Our mining operations are in Wuhai, Zhundong, Xinlinhot and Sichuan, China.”
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`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. But J
`Capital contacted the governments of Wuhai, Inner Mongolia, Zhundong, Xinjiang,
`and Xilinhot, Inner Mongolia. In telephone calls, local government officials of each
`locality told us they had no bitcoin mining operations and had not heard of Bit
`Digital.
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`“Big data, crypto currency, cloud computing parks or data centers—none of these
`have registered here,” said an official of Zhundong.
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`“There is no bitcoin center here,” said an official of Xilinhot.
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`CLASS ACTION COMPLAINT
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`Case 1:21-cv-00515 Document 1 Filed 01/20/21 Page 8 of 22
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`“There’s no bitcoin center here,” said an official of Wuhai. “I’ve never heard of Bit
`Digital.”
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`Fake purchases?
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`*
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`*
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`*
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`The company says it has been investing in bitcoin miners and uses these miners to
`mine on behalf of customers: “We will continue to invest in the miners to increase
`the hash rate capacity, as a percentage of total computing power contributed by all
`mining pool participants. Our mining operations are distributed in Xinjiang, Inner
`Mongolia and Sichuan Provinces PRC, and in Nebraska and Texas, United States
`which was newly launched in September 2020.” But how can auditors determine
`whether mining activity is being conducted?
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`We spoke with all the major manufacturers in China of bitcoin mining equipment.
`None had heard of BTBT.
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`One employee of MicroBT, a Shenzhen-based company from which BTBT
`reported buying 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. Three other
`MicroBT employees said they were not permitted to discuss customers.
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`Bitmain, from which BTBT said it bought 256 miners in the first nine months of
`2020, drew a blank when we inquired about BTBT. Bitmain supplies roughly 65%
`of the world market for miners and is unlikely not to know of a company that has
`purchased more than 41,000 machines in one year—even if the machines were
`bought second-hand.
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`We suspect that the capex spent in the first nine months of 2020--$18.8 mln—was
`simply stolen.
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`20.
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`On this news, Bit Digital’s stock price fell $6.27 per share, or 25%, to close at
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`$18.76 per share on January 11, 2021, on unusually heavy trading volume.
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`CLASS ACTION ALLEGATIONS
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`21.
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`Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
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`Procedure 23(a) and (b)(3) on behalf of a class, consisting of all persons and entities that purchased
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`or otherwise acquired Bit Digital securities between December 21, 2020 and January 8, 2021,
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`inclusive, and who were damaged thereby (the “Class”). Excluded from the Class are Defendants,
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`the officers and directors of the Company, at all relevant times, members of their immediate
`CLASS ACTION COMPLAINT
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`families and their legal representatives, heirs, successors, or assigns, and any entity in which
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`Defendants have or had a controlling interest.
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`22.
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`The members of the Class are so numerous that joinder of all members is
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`impracticable. Throughout the Class Period, Bit Digital’s shares actively traded on the NASDAQ.
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`While the exact number of Class members is unknown to Plaintiff at this time and can only be
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`ascertained through appropriate discovery, Plaintiff believes that there are at least hundreds or
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`thousands of members in the proposed Class. Millions of Bit Digital shares were traded publicly
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`during the Class Period on the NASDAQ. Record owners and other members of the Class may be
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`identified from records maintained by Bit Digital or its transfer agent and may be notified of the
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`pendency of this action by mail, using the form of notice similar to that customarily used in
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`securities class actions.
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`23.
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`Plaintiff’s claims are typical of the claims of the members of the Class as all
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`members of the Class are similarly affected by Defendants’ wrongful conduct in violation of
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`federal law that is complained of herein.
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`24.
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`Plaintiff will fairly and adequately protect the interests of the members of the Class
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`and has retained counsel competent and experienced in class and securities litigation.
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`25.
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`Common questions of law and fact exist as to all members of the Class and
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`predominate over any questions solely affecting individual members of the Class. Among the
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`questions of law and fact common to the Class are:
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`(a)
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`whether the federal securities laws were violated by Defendants’ acts as
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`alleged herein;
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`(b)
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`whether statements made by Defendants to the investing public during the
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`Class Period omitted and/or misrepresented material facts about the business, operations, and
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`prospects of Bit Digital; and
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`(c)
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`to what extent the members of the Class have sustained damages and the
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`proper measure of damages.
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`26.
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`A class action is superior to all other available methods for the fair and efficient
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`adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the
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`damages suffered by individual Class members may be relatively small, the expense and burden
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`of individual litigation makes it impossible for members of the Class to individually redress the
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`wrongs done to them. There will be no difficulty in the management of this action as a class action.
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`UNDISCLOSED ADVERSE FACTS
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`27.
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`The market for Bit Digital’s securities was open, well-developed and efficient at all
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`relevant times. As a result of these materially false and/or misleading statements, and/or failures
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`to disclose, Bit Digital’s securities traded at artificially inflated prices during the Class Period.
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`Plaintiff and other members of the Class purchased or otherwise acquired Bit Digital’s securities
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`relying upon the integrity of the market price of the Company’s securities and market information
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`relating to Bit Digital, and have been damaged thereby.
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`28.
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`During the Class Period, Defendants materially misled the investing public, thereby
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`inflating the price of Bit Digital’s securities, by publicly issuing false and/or misleading statements
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`and/or omitting to disclose material facts necessary to make Defendants’ statements, as set forth
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`herein, not false and/or misleading. The statements and omissions were materially false and/or
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`misleading because they failed to disclose material adverse information and/or misrepresented the
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`truth about Bit Digital’s business, operations, and prospects as alleged herein.
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`CLASS ACTION COMPLAINT
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`29.
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`At all relevant times, the material misrepresentations and omissions particularized
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`in this Complaint directly or proximately caused or were a substantial contributing cause of the
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`damages sustained by Plaintiff and other members of the Class. As described herein, during the
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`Class Period, Defendants made or caused to be made a series of materially false and/or misleading
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`statements about Bit Digital’s financial well-being and prospects. These material misstatements
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`and/or omissions had the cause and effect of creating in the market an unrealistically positive
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`assessment of the Company and its financial well-being and prospects, thus causing the
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`Company’s securities to be overvalued and artificially inflated at all relevant times. Defendants’
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`materially false and/or misleading statements during the Class Period resulted in Plaintiff and other
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`members of the Class purchasing the Company’s securities at artificially inflated prices, thus
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`causing the damages complained of herein when the truth was revealed.
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`LOSS CAUSATION
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`30.
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`Defendants’ wrongful conduct, as alleged herein, directly and proximately caused
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`the economic loss suffered by Plaintiff and the Class.
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`31.
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`During the Class Period, Plaintiff and the Class purchased Bit Digital’s securities
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`at artificially inflated prices and were damaged thereby. The price of the Company’s securities
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`significantly declined when the misrepresentations made to the market, and/or the information
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`alleged herein to have been concealed from the market, and/or the effects thereof, were revealed,
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`causing investors’ losses.
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`SCIENTER ALLEGATIONS
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`32.
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`As alleged herein, Defendants acted with scienter since Defendants knew that the
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`public documents and statements issued or disseminated in the name of the Company were
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`materially false and/or misleading; knew that such statements or documents would be issued or
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`disseminated to the investing public; and knowingly and substantially participated or acquiesced
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`CLASS ACTION COMPLAINT
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`in the issuance or dissemination of such statements or documents as primary violations of the
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`federal securities laws. As set forth elsewhere herein in detail, the Individual Defendants, by virtue
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`of their receipt of information reflecting the true facts regarding Bit Digital, their control over,
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`and/or receipt and/or modification of Bit Digital’s allegedly materially misleading misstatements
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`and/or their associations with the Company which made them privy to confidential proprietary
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`information concerning Bit Digital, participated in the fraudulent scheme alleged herein.
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`APPLICABILITY OF PRESUMPTION OF RELIANCE
`(FRAUD-ON-THE-MARKET DOCTRINE)
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`33.
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`The market for Bit Digital’s securities was open, well-developed and efficient at all
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`relevant times. As a result of the materially false and/or misleading statements and/or failures to
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`disclose, Bit Digital’s securities traded at artificially inflated prices during the Class Period. On
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`January 4, 2021, the Company’s share price closed at a Class Period high of $29.27 per share.
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`Plaintiff and other members of the Class purchased or otherwise acquired the Company’s securities
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`relying upon the integrity of the market price of Bit Digital’s securities and market information
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`relating to Bit Digital, and have been damaged thereby.
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`34.
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`During the Class Period, the artificial inflation of Bit Digital’s shares was caused
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`by the material misrepresentations and/or omissions particularized in this Complaint causing the
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`damages sustained by Plaintiff and other members of the Class. As described herein, during the
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`Class Period, Defendants made or caused to be made a series of materially false and/or misleading
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`statements about Bit Digital’s business, prospects, and operations. These material misstatements
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`and/or omissions created an unrealistically positive assessment of Bit Digital and its business,
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`operations, and prospects, thus causing the price of the Company’s securities to be artificially
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`inflated at all relevant times, and when disclosed, negatively affected the value of the Company
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`shares. Defendants’ materially false and/or misleading statements during the Class Period resulted
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`in Plaintiff and other members of the Class purchasing the Company’s securities at such artificially
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`inflated prices, and each of them has been damaged as a result.
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`35.
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`At all relevant times, the market for Bit Digital’s securities was an efficient market
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`for the following reasons, among others:
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`(a)
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`Bit Digital shares met the requirements for listing, and was listed and
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`actively traded on the NASDAQ, a highly efficient and automated market;
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`(b) As a regulated issuer, Bit Digital filed periodic public reports with the SEC
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`and/or the NASDAQ;
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`(c)
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`Bit Digital regularly communicated with public investors via established
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`market communication mechanisms, including through regular dissemination of press releases on
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`the national circuits of major newswire services and through other wide-ranging public disclosures,
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`such as communications with the financial press and other similar reporting services; and/or
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`(d)
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`Bit Digital was followed by securities analysts employed by brokerage
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`firms who wrote reports about the Company, and these reports were distributed to the sales force
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`and certain customers of their respective brokerage firms. Each of these reports was publicly
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`available and entered the public marketplace.
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`36.
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`As a result of the foregoing, the market for Bit Digital’s securities promptly
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`digested current information regarding Bit Digital from all publicly available sources and reflected
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`such information in Bit Digital’s share price. Under these circumstances, all purchasers of Bit
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`Digital’s securities during the Class Period suffered similar injury through their purchase of Bit
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`Digital’s securities at artificially inflated prices and a presumption of reliance applies.
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`37.
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`A Class-wide presumption of reliance is also appropriate in this action under the
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`Supreme Court’s holding in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972),
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`CLASS ACTION COMPLAINT
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`Case 1:21-cv-00515 Document 1 Filed 01/20/21 Page 14 of 22
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`because the Class’s claims are, in large part, grounded on Defendants’ material misstatements
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`and/or omissions. Because this action involves Defendants’ failure to disclose material adverse
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`information regarding the Company’s business operations and financial prospects—information
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`that Defendants were obligated to disclose—positive proof of reliance is not a prerequisite to
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`recovery. All that is necessary is that the facts withheld be material in the sense that a reasonable
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`investor might have considered them important in making investment decisions. Given the
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`importance of the Class Period material misstatements and omissions set forth above, that
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`requirement is satisfied here.
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`NO SAFE HARBOR
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`38.
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`The statutory safe harbor provided for forward-looking statements under certain
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`circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.
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`The statements alleged to be false and misleading herein all relate to then-existing facts and
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`conditions. In addition, to the extent certain of the statements alleged to be false may be
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`characterized as forward looking, they were not identified as “forward-looking statements” when
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`made and there were no meaningful cautionary statements identifying important factors that could
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`cause actual results to differ materially from those in the purportedly forward-looking statements.
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`In the alternative, to the extent that the statutory safe harbor is determined to apply to any forward-
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`looking statements pleaded herein, Defendants are liable for those false forward-looking
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`statements because at the time each of those forward-looking statements was made, the speaker
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`had actual knowledge that the forward-looking statement was materially false or misleading,
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`and/or the forward-looking statement was authorized or approved by an executive officer of Bit
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`Digital who knew that the statement was false when made.
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`CLASS ACTION COMPLAINT
`13
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`Case 1:21-cv-00515 Document 1 Filed 01/20/21 Page 15 of 22
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`FIRST CLAIM
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`Violation of Section 10(b) of The Exchange Act and
`Rule 10b-5 Promulgated Thereunder
`Against All Defendants
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`39.
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`Plaintiff repeats and re-alleges each and every allegation contained above as if fully
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`set forth herein.
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`40.
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`During the Class Period, Defendants carried out a plan, scheme and course of
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`conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing
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`public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and
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`other members of the Class to purchase Bit Digital’s securities at artificially inflated prices. In
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`furtherance of this unlawful scheme, plan and course of conduct, Defendants, and each defendant,
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`took the actions set forth herein.
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`41.
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`Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made
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`untrue statements of material fact and/or omitted to state material facts necessary to make the
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`statements not misleading; and (iii) engaged in acts, practices, and a course of business which
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`operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to
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`maintain artificially high market prices for Bit Digital’s securities in violation of Section 10(b) of
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`the Exchange Act and Rule 10b-5. All Defendants are sued either as primary participants in the
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`wrongful and illegal conduct charged herein or as controlling persons as alleged below.
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`42.
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`Defendants, individually and in concert, directly and indirectly, by the use, means
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`or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a
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`continuous course of conduct to conceal adverse material information about Bit Digital’s financial
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`well-being and prospects, as specified herein.
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`43.
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`Defendants employed devices, schemes and artifices to defraud, while in
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`possession of material adverse non-public information and engaged in acts, practices, and a course
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`CLASS ACTION COMPLAINT
`14
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`Case 1:21-cv-00515 Document 1 Filed 01/20/21 Page 16 of 22
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`of conduct as alleged herein in an effort to assure investors of Bit Digital’s value and performance
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`and continued substantial growth, which included the making of, or the participation in the making
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`of, untrue statements of material facts and/or omitting to state material facts necessary in order to
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`make the statements made about Bit Digital and its business operations and future prospects in
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`light of the circumstances under which they were made, not misleading, as set forth more
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`particularly herein, and engaged in transactions, practices and a course of business which operated
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`as a fraud and deceit upon the purchasers of the Company’s securities during the Class Period.
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`44.
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`Each of the Individual Defendants’ primary liability and controlling person liability
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`arises from the following facts: (i) the Individual Defendants were high-level executives and/or
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`directors at the Company during the Class Period and members of the Company’s management
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`team or had control thereof; (ii) each of these defendants, by virtue of their responsibilities and
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`activities as a senior officer and/or director of the Company, was privy to and participated in the
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`creation, development and reporting of the Company’s internal budgets, plans, projections and/or
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`reports; (iii) each of these defendants enjoyed significant personal contact and familiarity with the
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`other defendants and was advised of, and had access to, other members of the Company’s
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`management team, internal reports and other data and information about the Company’s finances,
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`operations, and sales at all relevant times; and (iv) each of these defendants was aware of the
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`Company’s dissemination of information to the investing public which they knew and/or
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`recklessly disregarded was materially false and misleading.
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`45.
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`Defendants had actual knowledge of the misrepresentations and/or omissions of
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`material facts set forth herein, or acted with reckless disregard for the truth in that they failed to
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`ascertain and to disclose such facts, even though such facts were available to them. Such
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`defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and
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`CLASS ACTION COMPLAINT
`15
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`Case 1:21-cv-00515 Document 1 Filed 01/20/21 Page 17 of 22
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`for the purpose and effect of concealing Bit Digital’s financial well-being and prospects from the
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`investing public and supporting the artificially inflated price of its securities. As demonstrated by
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`Defendants’ overstatements and/or misstatements of the Company’s business, operations,
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`financial well-being, and prospects throughout the Class Period, Defendants, if they did not have
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`actual knowledge of the misrepresenta