On January 11, 2021,analyst J Capital Research published a report alleging that Bit Digital operates a “fake crypto currency business,” that is “designed to steal funds from investors.” J Capital continued that although Bit Digital claims “it was operating 22,869 bitcoin miners in China,” that this “is simply not possible.” J Capital wrote that it “verified with local governments supposedly hosting the BTBT mining operations that there are no bitcoin miners there.” J Capital alleged that “the bitcoin business BTBT discloses is completely fraudulent.” The market was stunned by this report, and Bit Digital’s stock price fell $6.27in one day, or approximately 25%, to close at $18.76 on January 11, 2021. The stock has continued to fall since.
A lawsuit has been filed against Bit Digital and certain of its executives in the U.S. District Court for the Southern District of New York. The lawsuit is captioned Pauwels v. Bit Digital, Inc., et al., No. 21-cv-00515 (S.D.N.Y.). The suit alleges that Bit Digital misled investors as to the extent of the Company’s bitcoin mining operation.