Hut 8 has reached an agreement to pay $2.35 million to settle a proposed securities class action brought by investors who alleged that the bitcoin mining company misrepresented operational issues linked to its 2023 merger with U.S. Bitcoin Corp (USBTC). The proposed settlement was filed in the U.S. District Court for the Southern District of New York and aims to resolve claims from investors who purchased Hut 8 securities between February 13, 2023, and January 18, 2024. The agreement is still pending preliminary and final approval from U.S. District Judge Victor Marrero.
The lawsuit arose from Hut 8’s all-stock merger with USBTC, which was finalized in November 2023, forming the current entity known as Hut 8 Corp. Investors contended that Hut 8 exaggerated the benefits of the merger while failing to reveal critical issues related to energy and internet connectivity at the King Mountain bitcoin mining facility in Texas, where USBTC held a 50% stake prior to the merger.
Hut 8 has denied any wrongdoing under the terms of the proposed settlement and maintains that it did not violate any laws or inflict losses on investors. This lawsuit followed a short-seller report released in January 2024 by J Capital Research, which questioned Hut 8’s statements regarding the merger and highlighted potential issues at the King Mountain site. Following the report, Hut 8’s stock price took a hit, prompting the subsequent investor lawsuit, which cited claims under the Securities Act of 1933 and the Securities Exchange Act of 1934.
Before the settlement was reached, the litigation had already seen some claims dismissed. In September, Judge Marrero dismissed claims related to the Exchange Act as well as certain assertions about USBTC’s financial condition prior to the merger. However, he allowed part of the Securities Act case to continue, focusing on whether Hut 8 adequately disclosed the operational risks associated with King Mountain, a facility pivotal to USBTC’s operations in bitcoin mining and hosting.
In his request for the court’s preliminary approval of the settlement, lead plaintiff Abhishek Maheshwari noted that the agreement would offer investors an immediate recovery while also mitigating the risk that Hut 8 could prevail in court. Attorneys for the plaintiffs estimated that the $2.35 million settlement constitutes approximately 19.6% of the maximum recoverable damages, which they approximated at $12.08 million. This figure is noted to be above recent averages for settlements related exclusively to the Securities Act.
The settlement emerged following mediation, with both parties participating in a full-day virtual session on May 7, led by mediator Jed Melnick. Although the initial session did not yield immediate results, the parties eventually accepted a mediator’s proposal on May 13, which culminated in a formal settlement agreement dated June 18.
