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The Company is engaged in Bitcoin mining, i.e., using computers to solve cryptographic puzzles to correctly guess a new "hash," which results in the creation of new Bitcoin. Plaintiffs allege that the Company entered into an agreement with a manufacturer of cryptocurrency miners (the "Manufacturer") to purchase 15,000 Bitcoin miners in
The Court first addressed the Company's argument that the claims should be dismissed because plaintiffs did not allege that the Company knew or should have known that the Manufacturer would not be able to deliver the required number of Bitcoin miners. The Court rejected the Company's argument because scienter is not a requirement of the Section 11 and 12(a)(2) claims pleaded in the litigation. In applying this reasoning, the Court distinguished cases holding that Section 11 and 12(a)(2) claims must be dismissed when allegedly omitted risks were neither known nor knowable at the time of the challenged offering. According to the Court, those decisions did not require dismissal because plaintiffs "plausibly allege that [the Company]'s statement that it 'anticipated' the delivery of miners described in the Offering Materials was materially false or misleading at the time of the IPO." The Court emphasized that plaintiffs had sufficiently alleged that, at the time of the IPO, the Company's payment to the Manufacturer was behind schedule, there were known power outages in
The Court next addressed the Company's argument that the "bespeaks caution" doctrine required dismissal because of "the cautionary language in the IPO materials." The Court held that "[t]he doctrine does not apply . . . where a risk disclosed by Defendants has already transpired at the time the statements at issue were made." Regarding the Company's argument that misstatements about the delivery dates were immaterial, the Court held that the question was inappropriate for a motion to dismiss because, "absent fact discovery, the Court cannot determine that any delay in the shipment of miners would have been immaterial to investors given their alleged importance to [the Company]'s operations." The Court also held that defendants' negative causation arguments were best left for summary judgment.
Finally, the Court dismissed the Section 12(a)(2) claim asserted by one of the plaintiffs for lack of standing. Defendants argued that plaintiff in question alleged only that he purchased securities "pursuant and/or traceable to the Offering Materials" and did not allege that he had purchased the Company's shares directly from the Company in a public offering. Plaintiffs did not contest this point, and the Court dismissed the 12(a)(2) claim of this particular plaintiff.
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