Cannan Creative, a leading crypto mining hardware maker, has been hit with a class-action lawsuit in the United States for violating securities law.
Brought by the investors of the initial public offering (IPO) of the company, the lawsuit was filed at the United States District Court for the District of Oregon on March 4.
The class-action lawsuit alleges that the Chinese company misled investors by providing false information about the financial health and operation status of the company in the IPO filings with the Securities and Exchange Commission (SEC).
Filled by Bragar Eagel & Squire, a law firm specializing in shareholders’ rights, the lawsuit primarily alleged that the hardware manufacturer received an order of $150 million worth Canaan’s miners a month before the IPO filings from a Hong Kong-based company.
However, on paper, the company’s only had a market cap of $50 million with $16 million in cash in hand, creating serious doubts about Canaan’s business.
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Notably, the chairman of the Hong Kong firm also owns 9.7 percent of Canaan’s outstanding shares through various entities he controls – the information which Canaan did not disclose to its IPO investors.
Per the class-action lawsuit, Canaan’s financial conditions were much worse than was reported by the company. It also raises doubts about reported clients of the company as most of them were not from the digital asset mining industry. Canaan also removed numerous distributors from its website just before the IPO.
Complicit to Canaan?
Apart from Canaan, the lawsuit also named Galaxy Digital, China Renaissance Securities, Huatai Financial Holdings, CMB International Capital, and a few other firms, as defendants. Notably, Credit Suisse, a lead underwriter of Canaan’s IPO, dropped out days before the SEC filing.
Last November, Canaan sold 10 million American depositary shares for $9 apiece each at the bottom of their market range, which was kept between $9 to $11, raising $90 million in the process.
The shares, however, tanked in the open market, shedding around 49 percent of their value within days. Last month its stock rallied 82 percent in a day. However, the price was soon corrected – the last trading price being $4.83.