Judge Dismisses Lawsuit Against Iris Energy

A United States District Court judge has dismissed a class-action lawsuit brought by investors in Bitcoin miner Iris Energy.

The investors claimed that the company concealed key risks and misled them during its initial public offering (IPO) in 2021. The lawsuit targeted Iris Energy, its executives, and its underwriters, which included J.P. Morgan and Citigroup Global Markets.

In a Sept. 27 opinion order, US District Court Judge Jamel Semper ruled that the plaintiffs could not prove that Iris Energy had ever falsified statements or intentionally deceived investors.

The lawsuit alleged violations of both the Securities Act and the Securities Exchange Act during the firm's IPO and in subsequent statements.

Allegations of Misleading Information

The plaintiffs contended that several critical inaccuracies were present in the Australia-based crypto miner's IPO documents in November 2021.

They also claimed that Iris Energy concealed risks and failed to provide information about loans taken to finance mining equipment. The investors argued that the company made several 'false and misleading' statements about its financial condition, including profits, losses, and assets on hand.

However, Judge Semper found that Iris Energy had no obligation to disclose all details concerning its loan financing.

The plaintiffs failed to demonstrate that there was anything materially misleading about Iris Energy's disclosures. This decision led to the dismissal of the class-action lawsuit without prejudice.

Iris Energy's IPO and Market Performance

Iris Energy went public on Nov. 17, 2021, raising $232 million through its IPO. Despite debuting at a share price of $28, the firm's share price quickly tumbled amid a broader sell-off in the crypto market.

By Jan. 24, 2022, Iris Energy's share price had plummeted 69%, mirroring a similar decline in Bitcoin's price, which fell more than 36% during the same period.

In a statement on Sept. 30, Davis Polk — the firm representing Iris Energy and its executives — asserted that the plaintiffs had sought to recover losses incurred during the broad marketwide decline in Bitcoin's value in 2022.

The legal team emphasized that the investors' losses were caused by market conditions rather than misleading statements by Iris Energy.

Separate Allegations from Culper Research

Aside from the class-action suit, Iris Energy has faced scrutiny from short-selling firm Culper Research. The firm accused the Bitcoin miner of being 'wildly overvalued' and claimed that Iris Energy wasn't investing enough to stay competitive in the high-performance computing (HPC) industry.

Culper disclosed its short-selling position on Iris Energy and accused the company of talking a 'big game' about its HPC plans while investing far less than required.

Conclusion

The dismissal of the class-action lawsuit marks a significant legal victory for Iris Energy. However, the company continues to face challenges from market performance and external critics like Culper Research.

As the cryptocurrency and high-performance computing industries evolve, Iris Energy must address these issues to maintain investor confidence and market competitiveness.