Thompson v. Leverton — Entry #9: FIRST AMENDED COMPLAINT amending 1 Complaint, against Joseph Flinn, Asher Genoot, Alexia Hefti, Michael Ho, Hut 8 Corp., Jamie Leverton, Stanley O'Neal, Rick…
Case: Thompson v. Leverton nysd · 1:24-cv-02542
filed April 03, 2024
What this document is
Docket entry #9 · filed April 05, 2024
FIRST AMENDED COMPLAINT amending 1 Complaint, against Joseph Flinn, Asher Genoot, Alexia Hefti, Michael Ho, Hut 8 Corp., Jamie Leverton, Stanley O'Neal, Rick Rickertsen, Mayo A. Shattuck, III, Bill Tai, Shenif Visram, Amy Wilkinson with JURY DEMAND.Document filed by Jeffrey Thompson. Related document: 1 Complaint,..(Brown, Timothy) (Entered: 04/05/2024)
Who is involved
- Hut 8 Corp. [tracked: Hut 8]
- Alexia Hefti
- Amy Wilkinson
- Asher Genoot
- Bill Tai
- Jamie Leverton
- Jeffrey Thompson
- Joseph Flinn
- Mayo A. Shattuck, III
- Michael Ho
- Rick Rickertsen
- Shenif Visram
- Stanley O'Neal
Why we have it
We follow this case because a company we track is a party: Hut 8 (listed as “Hut 8 Corp.”). We checked the full party list on September 12, 2026 and confirmed the match.
A free copy from the RECAP archive of federal court filings (mirrored at the Internet Archive), retrieved September 26, 2026. Federal court filings are public records.
Document text
58 page(s), 124,320 characters, converted from the PDF's text layer · plain text.
Full text
Case 1:24-cv-02542-GHW Document 9 Filed 04/05/24 Page 1 of 58
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
JEFFREY THOMPSON, derivatively on behalf
of HUT 8 CORP.,
Case No.: 1:24-cv-02542
Plaintiff,
vs.
JAMIE LEVERTON, SHENIF VISRAM, DEMAND FOR JURY TRIAL
JOSEPH FLINN, ASHER GENOOT, ALEXIA
HEFTI, MICHAEL HO, STANLEY O’NEAL,
RICK RICKERTSEN, MAYO A. SHATTUCK,
III, BILL TAI, and AMY WILKINSON
Defendants,
and
HUT 8 CORP.,
Nominal Defendant.
VERIFIED SHAREHOLDER DERIVATIVE AMENDED COMPLAINT
INTRODUCTION
Plaintiff Jeffrey Thompson (“Plaintiff”), by Plaintiff’s undersigned attorneys, derivatively
and on behalf of Nominal Defendant Hut 8 Corp., (“Hut 8” or the “Company”), files this Verified
Shareholder Derivative Amended Complaint against Jamie Leverton (“Leverton”), Shenif Visram
(“Visram”), Joseph Flinn (“Flinn”), Asher Genoot (“Genoot”), Alexia Hefti (“Hefti”), Michael Ho
(“Ho”), Stanley O’Neal (“O’Neal”), Rick Rickertsen (“Rickertsen”), Mayo A. Shattuck, III
(“Shattuck”), Bill Tai (“Tai”), and Amy Wilkinson (“Wilkinson”) (collectively, the “Individual
Defendants,” and together with Hut 8, the “Defendants”) for breaches of their fiduciary duties as
directors and/or officers of Hut 8, unjust enrichment, abuse of control, gross mismanagement,
waste of corporate assets, and for contribution under Sections 10(b) and 21D of the Securities
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Exchange Act of 1934 (the “Exchange Act”). As for Plaintiff’s complaint against the Individual
Defendants, Plaintiff alleges the following based upon personal knowledge as to Plaintiff and
Plaintiff’s own acts, and information and belief as to all other matters, based upon, inter alia, the
investigation conducted by and through Plaintiff’s attorneys, which included, among other things,
a review of the Defendants’ public documents, conference calls and announcements made by the
Defendants, United States Securities and Exchange Commission (“SEC”) filings, wire and press
releases published by and regarding Hut 8, legal filings, news reports, securities analysts’ reports
and advisories about the Company, and information readily obtainable on the Internet. Plaintiff
believes that substantial evidentiary support will exist for the allegations set forth herein after a
reasonable opportunity for discovery.
NATURE OF THE ACTION
1. This is a shareholder derivative action that seeks to remedy wrongdoing committed
by the Individual Defendants from November 9, 2023 to January 18, 2024, both dates inclusive
(the “Relevant Period”).
2. Hut 8 is a cryptocurrency mining company that provides digital asset mining and
high-performance computing infrastructure solutions in Canada. The Company claims to be a
“leading innovator” and the “first company to operate computing infrastructure across sites that
mines Bitcoin and delivers cloud, colocation, and high-performance computing services to our
enterprise customers.”
3. Founded in 2011, the Company was previously incorporated in British Columbia,
Canada and operated as Hut 8 Mining Corp. (“Legacy Hut”). On November 30, 2023, Legacy Hut
effected a strategic all-stock merger combining Legacy Hut and U.S. Data Mining Group, Inc.
d/b/a US Bitcoin Corp. (“USBTC”) (the “Merger”). As a result of the Merger, Hut 8 was formed
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and each Legacy Hut shareholder received 0.2 shares of Hut 8 common stock, while each USBTC
shareholder received 0.6716 shares of Hut 8 common stock.
4. Before the Merger, in December 2022, USBTC acquired a 50% interest in a joint
venture bitcoin mining production facility in King Mountain, Texas (the “King Mountain Joint
Venture”). As a result of the Merger, King Mountain Joint Venture became a part of the Company.
5. On January 18, 2024, the truth about the Merger was revealed when J Capital
Research published an article titled “The Coming HUT Pump and Dump: Management hiding
stock ownership through undisclosed related party, a stock-promoter cabal, and a host of left-for-
dead assets” (the “J Capital Report”). The J Capital Report alleged, among other things, that the
Merger was consummated on misstatements and omissions of material fact that failed to disclose
that: (1) one of USBTC’s biggest shareholders was an “undisclosed related party;” (2) USBTC’s
main asset and premier mining location, King Mountain Joint Venture, which became the property
of Hut 8 by dint of the Merger, was not a financially stable asset since it “historically failed to
provide energy and high-speed internet –unquestionably the two most important inputs for mining
Bitcoin;” and (3) King Mountain Joint Venture had certain interest expenses that were not properly
accounted for, making it appear as if King Mountain Joint Venture would be more profitable to
Hut 8 than it actually was; and (4) according to an individual “highly familiar with USBTC,” if
not for the Merger, USBTC “would have done a structured bankruptcy.”
6. On this news, the Company’s stock price fell $2.16 per share, or 23.3%, from
closing at $9.28 per share on January 17, 2024, to close at $7.12 per share on January 18, 2024, on
abnormally high trading volume.
7. During the Relevant Period, the Individual Defendants breached their fiduciary
duties throughout the Relevant Period by personally making and/or causing the Company to make
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to the investing public a series of materially false and misleading statements regarding the
Company’s business, operation, and prospects. Specifically, the Individual Defendants willfully
or recklessly made and/or caused the Company to make false and misleading statements that failed
to disclose, inter alia, that: (1) one of USBTC’s biggest shareholders was an “undisclosed related
party;” (2) USBTC’s main asset and premier mining location, King Mountain Joint Venture, which
became the property of Hut 8 by dint of the Merger, was not a financially stable asset since it
historically failed to provide energy and high-speed internet – core necessities for a data mining
venture; (3) King Mountain Joint Venture had certain interest expenses that were not properly
accounted for, making it appear as if King Mountain Joint Venture would be more profitable to
Hut 8 than it actually was; (4) the profitability of certain USBTC assets was exaggerated; and (5)
as a result, the Merger posed a significant risk to Hut 8’s financial stability. As a result of the
foregoing, the Company’s public statements were materially false and misleading and/or lacked a
reasonable basis at all relevant times.
8. The Individual Defendants also breached their fiduciary duties by failing to correct
and/or caused the Company to fail to correct these false and misleading statements and omissions
of material fact to the investing public.
9. Additionally, in breach of their fiduciary duties, the Individual Defendants caused
the Company to fail to maintain adequate internal controls while two of the Individual Defendants
engaged in improper insider sales, netting personal proceeds totaling $2,017,286.
10. The Individual Defendants also breached their fiduciary duties by failing to correct
and/or causing the Company to fail to correct these false and misleading statements and omissions
of material fact.
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11. In light of the Individual Defendants’ misconduct—which has subjected the
Company, its Chief Executive Officer (“CEO”) and its Chief Financial Officer (“CFO”), to a
consolidated federal securities fraud class action lawsuit pending in the United States District
Court for the Southern District of New York (the “Securities Class Action”) which has further
subjected the Company to the need to undertake internal investigations, the need to implement
adequate internal controls, losses from the waste of corporate assets, and losses due to the unjust
enrichment of Individual Defendants who were improperly overcompensated by the Company
and/or who benefitted from the wrongdoing alleged herein—the Company will have to expend
many millions of dollars.
12. The Company has been substantially damaged as a result of the Individual
Defendants’ knowing or highly reckless breaches of fiduciary duty and other misconduct.
13. In light of the breaches of fiduciary duty engaged in by the Individual Defendants,
most of whom are the Company’s current directors, of the collective engagement in fraud and
misconduct by the Company’s directors, of the substantial likelihood of the directors’ liability in
this derivative action, of the CEO’s and CFO’s liability in the Securities Class Action, and of their
not being disinterested and/or independent directors, a majority of the Company’s Board of
Directors (the “Board”) cannot consider a demand to commence litigation against themselves on
behalf of the Company with the requisite level of disinterestedness and independence.
JURISDICTION AND VENUE
14. This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 because
Plaintiff’s claims raise a federal question under Section 10(b) of the Exchange Act (15 U.S.C. §§
78j(b)), Section 21D of the Exchange Act (15 U.S.C. § 78u-4(f)) and SEC Rule 10b-5 (17 C.F.R.
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§ 240.10b-5) promulgated thereunder, and raise a federal question pertaining to the claims made
in the Securities Class Action based on violations of the Exchange Act.
15. This Court has supplemental jurisdiction over Plaintiff’s state law claims pursuant
to 28 U.S.C. § 1367(a).
16. This derivative action is not a collusive action to confer jurisdiction on a court of
the United States that it would not otherwise have.
17. Venue is proper in this District because the alleged misstatements and wrongs
complained of herein entered this District, the Defendants have conducted business in this District,
and Defendants’ actions have had an effect in this District.
PARTIES
Plaintiff
18. Plaintiff is a current shareholder of Hut 8. Plaintiff has continuously held Hut 8
common stock since November 11, 2021.
Nominal Defendant Hut 8
19. Nominal Defendant Hut 8 is a Delaware corporation with its principal executive
offices located at 1101 Brickell Avenue, Suite 1500, Miami, FL, 33131. Hut 8’s shares trade on
the NASDAQ under the ticker symbol “HUT.”
Defendant Leverton
20. Defendant Leverton served as the Company’s CEO from the Merger until her
termination on February 6, 2024. Defendant Leverton also served as a Company director from the
Merger until her termination on February 12, 2024. Previously, she had served as Legacy Hut’s
CEO from December 2020 until the Merger. According to the Form 4 the Company filed with the
SEC on December 12, 2023, as of December 9, 2023, Defendant Leverton beneficially owned
337,233 shares of Hut 8 common stock. Given that the price per share of the Company’s common
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stock at the close of trading on December 8, 2023 was $10.25, Defendant Leverton owned
approximately $3.5 million worth of Hut 8 stock as of that date.
21. According to Defendant Leverton’s Employment Agreement, dated November 30,
2023, Defendant Leverton was entitled to receive $550,000 in total compensation from the
Company for the fiscal year ended December 31, 2023 (the “2023 Fiscal Year”), made up entirely
of her base salary. On February 12, 2024, Defendant Leverton and the Company entered into the
Separation Agreement which entitles Defendant Leverton to a $1,100,000 cash payment and
another cash payment of $500,000 in lieu of a bonus for the 2023 Fiscal Year.
22. During the Relevant Period, while the Company’s stock price was artificially
inflated and before the scheme were exposed, Defendant Leverton made the following sales of
Company stock at artificially inflated prices:
Date Number of Shares Avg. Price/Share Proceeds
12/22/2023 98,724 $14.21 $1,402,966
1/12/2024 35,761 $10.10 $361,257
Thus, in total, before the fraud was exposed, she sold 134,485 shares of Company stock on inside
information, for which she received approximately $1,764,223 in proceeds. Her insider sales, made
with knowledge of material nonpublic information before the material misstatements and
omissions were exposed, demonstrate her motive in facilitating and participating in the schemes.
23. The Company’s prospectus filed on Form424B3 with the SEC on November 9,
2024 (the “Prospectus”) in connection with the Merger stated the following about Defendant
Leverton:
Jamie Leverton
Ms. Leverton is currently Chief Executive Officer of Hut 8. Ms. Leverton is a
highly accomplished technology executive and industry thought leader with a long
history of driving high growth mandates. With more than 20 years of leadership in
the Canadian technology industry, she joined Hut 8 from her role as the Chief
Commercial Officer at eStruxture Data Centers. Her career also includes tenure as
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the General Manager of Canada and APAC with data center and cloud provider
Cogeco Peer 1 (now Aptum) and leadership roles with National Bank, BlackBerry,
Bell Canada and IBM Canada. She proudly sits on the board of the Stratford
Festival.
Defendant Visram
24. Defendant Visram has served as the Company’s CFO since the Merger. Previously,
he served as Legacy Hut’s CFO from December 2022 until the Merger. According to the Form 4
the Company filed with the SEC on December 12, 2023, as of December 12, 2023, Defendant
Visram beneficially owned 33,334 shares of Hut 8 common stock. Given that the price per share
of the Company’s common stock at the close of trading on December 12, 2023 was $8.43,
Defendant Visram owned approximately $281,005 worth of Hut 8 stock as of that date.
25. According to Defendant Visram’s Employment Agreement, dated November 30,
2023, Defendant Visram is entitled to receive $375,000 in total compensation from the Company,
made up entirely of base salary.
26. During the Relevant Period, while the Company’s stock price was artificially
inflated and before the scheme were exposed, Defendant Visram made the following sale of
Company stock:
Date Number of Shares Avg. Price/Share Proceeds
December 22, 2023 17, 897 $14.14 $253,063
Thus, in total, before the fraud was exposed, he sold 17,897 shares of Company stock on inside
information, for which he received approximately $253,063 in proceeds. His insider sale, made
with knowledge of material nonpublic information before the material misstatements and
omissions were exposed, demonstrate his motive in facilitating and participating in the schemes.
27. The Prospectus stated the following about Defendant Visram:
Shenif Visram
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Shenif Visram is currently the Chief Financial Officer of Hut 8. With over 20 years
of experience leading world-class finance organizations, Shenif brings a breath of
corporate and operational finance experience to Hut 8. He began his finance career
at IBM Canada, where he progressed to the CFO roles in the largest IBM Canada
Business units. He then moved to Cogeco Peer 1 as Vice President, Finance, where
he jointly led the sale of the company to a private equity firm. He remained with
the company post-sale and assumed the role of CFO, where he led the privatization
of the company and played a key role in rebranding to Aptum Technologies. Shenif
is a Charter Professional Accountant (CPA, CMA).
Defendant Flinn
28. Defendant Flinn has served as a Company director since the Merger. He also serves
as Chair of the Audit Committee. Previously, he served as a director of Legacy Hut from August
2018 until the Merger. According to the Form 3 the Company filed with the SEC on December 6,
2023, as of November 30, 2023, Defendant Flinn beneficially owned 1,561 shares of Hut 8
common stock. Given that the price per share of the Company’s common stock at the close of
trading on November 30, 2023 was $9.50, Defendant Flinn owned approximately $14,830 worth
of Hut 8 stock as of that date.
29. The Prospectus stated the following about Defendant Flinn:
Joseph Flinn
Mr. Flinn has served as a director of Hut 8 since August 2018. He is the Chief
Financial Officer of Seaboard Transportation Group, a major international bulk
transportation group of companies. Prior thereto, Mr. Flinn held senior leadership
positions at Sysco Corporation from 2008 to 2015, where he played an integral role
as both Chief Financial Officer of Sysco Canada, and President of Sysco Canada’s
Eastern Division, and two years as President of Clarke Freight Transportation
Group, a major national freight carrier. Mr. Flinn holds a business degree from
Saint Mary’s University and is a chartered professional accountant. Mr. Flinn is a
member of the Institute of Corporate Directors and holds an ICD.D designation.
Defendant Genoot
30. Defendant Genoot has served as the Company’s CEO since February 6, 2024.
Previously, he had served as the Company’s President from the Merger until February 6, 2024.
Prior to that role, he co-founded USBTC with Defendant Ho in 2020 and served as USBTC’s
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Director and President until the Merger. According to the Form 4 the Company filed with the SEC
on December 4, 2023, as of November 30, 2023, Defendant Genoot beneficially owned 3,044,408
shares of Hut 8’s common stock. Given that the price per share of the Company’s common stock
at the close of trading on November 30, 2023 was $9.50, Defendant Genoot owned approximately
$28,921,876 worth of Hut 8 stock as of that date.
31. According to Defendant Genoot’s Employment Agreement, dated November 30,
2023, Defendant Genoot is entitled to receive $490,000 in total compensation from the Company,
made up entirely of base salary.
32. The Prospectus stated the following about Defendant Genoot:
Asher Genoot
Mr. Genoot has served as USBTC’s President and as a Director since its inception
and will serve as President and a director of New Hut. He has been a serial
entrepreneur who started his first business, the Ivy Crest Institute of International
Education, at the age of 19 in Shanghai, China and sold it shortly after. Following
that experience, Mr. Genoot served as the founder and Chief Executive Officer at
Curio, a Shanghai-based education company that expanded across the country from
April 2016 to May 2019. He currently serves as a Board Member at Curio. He also
has experience as the Managing Director at Flagship Endeavors, a brand incubator.
Mr. Genoot graduated from the University of Southern California with a Bachelor’s
in Business Administration.
Defendant Hefti
33. Defendant Hefti has served as a Company director since the Merger. Defendant
Hefti also serves as a member of the Nominating, Environmental, Social and Governance
Committee. Previously, she served as a director of Legacy Hut from May 2021 until the Merger.
According to the Form 3 the Company filed with the SEC on December 6, 2023, as of November
30, 2023, Defendant Hefti beneficially owned 16,564 shares of Hut 8’s common stock. Given that
the price per share of the Company’s common stock at the close of trading on November 30, 2023
was $9.50, Defendant Hefti owned approximately $157,358 worth of Hut 8 stock as of that date.
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34. The Prospectus stated the following about Defendant Hefti:
Alexia Hefti
Ms. Hefti has served as a director of Hut 8 since May 2021. She serves as the Chief
Executive Officer of eGovern.com, assisting governments in designing blockchain-
enabled government services aimed at increasing citizenry engagement and
governance, and as Special Advisor, Middle Eastern Affairs and Policy for the
Government of Bermuda. She also serves as and Chairman of the Abed Group, a
venture studio and private equity fund for blockchain regulatory technology
companies. Ms. Hefti worked at Deloitte Middle East and Deloitte Canada, where
she co-founded the blockchain and digital asset tax advisory practice. Ms. Hefti is
a New York-qualified lawyer, and a graduate from McGill University (B.C.L/
LL.B) and the University of British Columbia (BA).
Defendant Ho
35. Defendant Ho has served as the Company’s Chief Strategic Officer (“CSO”) and
as a Company director since the Merger. Prior to the Merger, Defendant Ho co-founded USBTC
in 2020 with Defendant Genoot and served as USBTC’s CEO and Chairman of the Board until the
Merger. According to the Form 4 the Company filed with the SEC on December 4, 2023, as of
November 30, 2023, Defendant Ho beneficially owned 6,326,412 shares of Hut 8 common stock.
Given that the price per share of the Company’s common stock at the close of trading on November
30, 2023 was $9.50, Defendant Ho owned approximately $60 million worth of Hut 8 stock as of
that date.
36. According to Defendant Ho’s Employment Agreement, dated November 30, 2023,
Defendant Ho is entitled to receive $490,000 in total compensation from the Company,
consistently entirely of base salary.
37. The Prospectus stated the following about Defendant Ho:
Michael Ho
Mr. Ho has served as USBTC’s Chief Executive Officer and as Chairman of the
USBTC Board since its inception and will serve as Chief Strategy Officer and a
director of New Hut. Mr. Ho has experience as a serial entrepreneur having founded
numerous businesses in the digital and traditional trade sectors. He served as the
CEO of Vancouver Motorcars Ltd. (formerly Advant Automotive Inc) from
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January 2012 to April 2015. Mr. Ho then served as the CEO of MKH International
Ltd, from July 2015 to December 2018. During this 6-year period, Mr. Ho
specialized in currencies, international trade, structured financings and equity
structuring. Mr. Ho also has extensive experience in the industry, having begun
mining digital assets in 2014 and in 2017, Mr. Ho began setting up businesses
procuring, managing, and selling turnkey digital asset mining facilities.
Defendant O’Neal
38. Defendant O’Neal has served as a Company director since the Merger. He also
serves as a member of the Audit Committee. Prior to the Merger, he served as a USBTC director
from April 2021 until the Merger. According to the Form 3 the Company filed with the SEC on
December 5, 2023, as of November 30, 2023, Defendant O’Neal beneficially owned 211,039
shares of Hut 8 common stock. Given that the price per share of the Company’s common stock at
the close of trading on November 30, 2023 was $9.50, Defendant O’Neal owned approximately
$2 million worth of Hut 8 stock as of that date.
39. The Prospectus stated the following about Defendant O’Neal:
Stanley O’Neal
Mr. O’Neal has served as a director of USBTC since April 2021 and will serve as
a director of New Hut. Mr. O’Neal is the former Chairman and Chief Executive
Officer of Merrill Lynch. He became Merrill’s chief executive in 2002 and was
elected Chairman of Merrill Lynch in 2003, serving in both positions until October
2007. He also served as director of American Beacon Advisors, Inc. from 2009 to
September 2012. Mr. O’Neal worked for Merrill Lynch for 21 years. He was named
President and Chief Operating Officer in 2001 and before that was President of the
brokerage firm’s U.S. Private Client group. He served as Executive Vice President
and Chief Financial Officer of Merrill Lynch from 1998 until 2000 and also held
the position of Executive Vice President and Co-Head of the Corporate and
Institutional Client Group for one year starting in 1997. Before joining Merrill
Lynch, Mr. O’Neal was employed at General Motors Corporation where he held a
number of financial positions of increasing responsibility, including General
Assistant Treasurer. Mr. O’Neal received a Master’s of Business Administration
with distinction in Finance from Harvard University and is a graduate of Kettering
University (formerly General Motors Institute). He served on General Motor’s
Board of Directors from 2001-2006 and also currently serves on the boards of
Clearway Energy, Element Solutions, and Arconic Corporation.
Defendant Rickertsen
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40. Defendant Rickertsen has served as a Company director since the Merger. He also
serves as a member of the Compensation and Talent Development Committee. According to the
Form 3 the Company filed with the SEC on December 6, 2023, as of November 30, 2023,
Defendant Rickertsen beneficially owned 14,991 shares of Hut 8 common stock. Given that the
price per share of the Company’s common stock at the close of trading on November 30, 2023 was
$9.50, Defendant Rickertsen owned approximately $142,414 worth of Hut 8 stock as of that date.
41. The Prospectus stated the following about Defendant Rickertsen:
Carl J. Rickertsen
Mr. Rickertsen has served as a director of Hut 8 since December 2021. He is
currently managing partner of Pine Creek Partners LLC a private equity investment
firm, a position he has held since January 2004. From September 1994 to January
2004, Mr. Rickertsen was a managing partner at Thayer Capital Partners where he
founded three private equity funds totaling over $1.4 billion. He has served as a
member of the boards of directors and audit committees of Apollo Senior Floating
Rate Fund Inc. and Apollo Tactical Income Fund Inc., each of which is a closed-
end management investment company, since 2011 and 2013, respectively. Mr.
Rickertsen has also served as a member of the board of directors and audit and
compensation committees of Berry Global Inc., a global manufacturer and marketer
of value-added plastic consumer packaging and engineered materials, since January
2013. From April 2012 to October 2016, Mr. Rickertsen was a member of the board
of directors and compensation committee of Noranda Aluminum Holding
Corporation, an integrated producer of value-added primary aluminum products
and rolled aluminum coils. From April 2003 to January 2010, Mr. Rickertsen was
a member of the board of directors and audit committee of Convera Corporation, a
publicly-traded search-engine software company. From March 2004 to September
2008, Mr. Rickertsen was a member of the board of directors and compensation
committee of UAP Holding Corp., a distributor of farm and agricultural products.
Mr. Rickertsen received a B.S. from Stanford University and an M.B.A. from
Harvard Business School. He is also a published author.
Defendant Shattuck
42. Defendant Shattuck has served as a Company director since the Merger. He also
serves as the Chair of the Compensation and Talent Development Committee and as a member of
the Audit Committee. Prior to the Merger, he served as a USBTC director from December 2021
until the Merger. According to the Form 3 the Company filed with the SEC on December 5, 2023,
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as of November 30, 2023, Defendant Shattuck beneficially owned 54,903 shares of Hut 8 common
stock. Given that the price per share of the Company’s common stock at the close of trading on
November 30, 2023 was $9.50, Defendant Shattuck owned approximately $521,578 worth of Hut
8 stock as of that date.
43. The Prospectus stated the following about Defendant Shattuck:
Mayo A. Shattuck III
Mr. Shattuck has served as a director of USBTC since December 2021 and will
serve as a director of New Hut. He previously served as the Chairman of Exelon, a
position he held from February 2012 to April 2022, and previously served as the
Executive Chairman of the Board of Exelon from March 2012 through February
2013. Prior to its merger with Exelon, Mr. Shattuck was the Chairman, President
and Chief Executive Officer of Constellation Energy, a position he held from
October 2001 to February 2012. Constellation Energy owned energy-related
businesses, including a wholesale and retail power marketing and merchant
generation business. Mr. Shattuck was previously at Deutsche Bank, where he
served as Chairman of the Board and CEO of Deutsche Banc Alex. Brown and as
Global Head of Investment Banking and Global Head of Private Banking. While
Chairman and CEO of Constellation Energy and Executive Chairman of Exelon,
Mr. Shattuck served as Chairman of the Board of the Institute of Nuclear Power
Operations and is a member of the Executive Committee of the Board of Edison
Electric Institute and the Nuclear Energy Institute. He was also Co-Chairman of the
Center for Strategic & International Studies Commission on Nuclear Policy in the
United States and Executive Committee member of the Council on
Competitiveness. Mr. Shattuck also currently serves on the Boards of Directors for
Gap Inc. (since 2002) and Capital One Financial Corporation (since 2003). Mr.
Shattuck has a Bachelor of Arts from Williams College and a Masters in Business
Administration from The Stanford Graduate School of Business.
Defendant Tai
44. Defendant Tai has served as Chairman of the Board since the Merger. He also
serves as a member of the Nominating, Environmental, Social and Governance Committee. Prior
to the Merger, he had served as a director of Legacy Hut from March 2018 until the Merger.
According to the Form 3 the Company filed with the SEC on December 6, 2023, as of November
30, 2023, Defendant Tai beneficially owned 137,857 shares of Hut 8 common stock. Given that
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the price per share of the Company’s common stock at the close of trading on November 30, 2023
was $9.50, Defendant Tai owned approximately $1.3 million worth of Hut 8 stock as of that date.
45. The Prospectus stated the following about Defendant Tai:
Bill Tai
Mr. Tai has served as a director of Hut 8 since March 2018. He is a venture capitalist
and was an early investor behind high profile start-ups including Canva, Color
Genomics, Dapper Labs, Safety Culture, Tweetdeck, and Zoom Video. Previously,
Mr. Tai co-founded several successful technology companies as Chairman
including IPInfusion and Treasure Data Inc, and has served as a Director of seven
publicly listed companies. He holds a Bachelor of Science in Electrical Engineering
with Honors from the University of Illinois and an MBA from Harvard University.
Defendant Wilkinson
46. Defendant Wilkinson has served as a Company director since the Merger. She also serves
as Chair of the Nominating, Environmental, Social and Governance Committee and as a member
of the Compensation and Talent Development Committee. Prior to the Merger, she served as a
director of USBTC from August 2022 until the Merger.
47. The Prospectus stated the following about Defendant Wilkinson:
Amy Wilkinson
Ms. Wilkinson has served as a director of USBTC since August 2022 and will serve
as a director of New Hut. She currently serves as the Chief Executive Officer of
Ingenuity, an innovation consulting firm, a role she has held since founding the firm
in January 2017. Ms. Wilkinson also serves as a Lecturer in Management at the
Stanford Graduate School of Business, a role she has held since May 2015. Before
joining the Stanford Graduate School of Business, Ms. Wilkinson was a Kauffman
Foundation Grantee for Research on High Growth Entrepreneurs from 2013 to 2015
and a Senior Fellow at the Harvard Kennedy School of Government from 2009 to
2015. Ms. Wilkinson served in The White House as a White House Fellow and
Special Assistant to the United States Trade Representative from 2004 to 2007. She
also has experience as a strategy consultant at McKinsey & Company and as a
mergers and acquisitions banker at JP Morgan. In addition to serving as a director
of USBTC, Ms. Wilkinson currently serves on the Board of Directors for
INNOVATE Corp. (since 2022). Ms. Wilkinson holds a Bachelor of Arts and
Master of Arts from Stanford University and a Masters in Business Administration
from the Stanford Graduate School of Business.
FIDUCIARY DUTIES OF THE INDIVIDUAL DEFENDANTS
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48. By reason of their positions as officers, directors, and/or fiduciaries of Hut 8 and
because of their ability to control the business and corporate affairs of Hut 8, the Individual
Defendants owed Hut 8 and its shareholders fiduciary obligations of trust, loyalty, good faith, and
due care, and were and are required to use their utmost ability to control and manage Hut 8 in a
fair, just, honest, and equitable manner. The Individual Defendants were and are required to act
in furtherance of the best interests of Hut 8 and its shareholders so as to benefit all shareholders
equally.
49. Each director and officer of the Company owes to Hut 8 and its shareholders the
fiduciary duty to exercise good faith and diligence in the administration of the Company and in
the use and preservation of its property and assets and the highest obligations of fair dealing.
50. The Individual Defendants, because of their positions of control and authority as
directors and/or officers of Hut 8, were able to and did, directly and/or indirectly, exercise control
over the wrongful acts complained of herein.
51. To discharge their duties, the officers and directors of Hut 8 were required to
exercise reasonable and prudent supervision over the management, policies, controls, and
operations of the Company.
52. Each Individual Defendant, by virtue of his or her position as a director and/or
officer, owed to the Company and to its shareholders the highest fiduciary duties of loyalty, good
faith, and the exercise of due care and diligence in the management and administration of the
affairs of the Company, as well as in the use and preservation of its property and assets. The
conduct of the Individual Defendants complained of herein involves a knowing and culpable
violation of their obligations as directors and officers of Hut 8, the absence of good faith on their
part, or a reckless disregard for their duties to the Company and its shareholders that the Individual
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Defendants were aware or should have been aware posed a risk of serious injury to the Company.
The conduct of the Individual Defendants who were also officers and directors of the Company
has been ratified by the remaining Individual Defendants who collectively comprised Hut 8’s
Board at all relevant times.
53. As senior executive officers and/or directors of a publicly-traded company whose
common stock was registered with the SEC pursuant to the Exchange Act and traded on the
NASDAQ, the Individual Defendants had a duty to prevent and not to effect the dissemination of
inaccurate and untruthful information with respect to the Company’s financial condition,
performance, growth, operations, financial statements, business, products, management, earnings,
internal controls, and present and future business prospects, including the dissemination of false
information regarding the Company’s business, prospects, and operations, and had a duty to cause
the Company to disclose in its regulatory filings with the SEC all those facts described in this
complaint that it failed to disclose, so that the market price of the Company’s common stock would
be based upon truthful and accurate information. Further, they had a duty to ensure the Company
remained in compliance with all applicable laws.
54. To discharge their duties, the officers and directors of Hut 8 were required to
exercise reasonable and prudent supervision over the management, policies, practices, and internal
controls of the Company. By virtue of such duties, the officers and directors of Hut 8 were required
to, among other things:
(a) ensure that the Company was operated in a diligent, honest, and prudent
manner in accordance with the laws and regulations of Delaware and the United States, and
pursuant to Hut 8’s own Code of Business Conduct and Ethics (the “Hut 8’s Code of Conduct”);
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(b) conduct the affairs of the Company in an efficient, business-like manner so
as to make it possible to provide the highest quality performance of its business, to avoid wasting
the Company’s assets, and to maximize the value of the Company’s stock;
(c) remain informed as to how Hut 8 conducted its operations, and, upon receipt
of notice or information of imprudent or unsound conditions or practices, to make reasonable
inquiry in connection therewith, and to take steps to correct such conditions or practices;
(d) establish and maintain systematic and accurate records and reports of the
business and internal affairs of Hut 8 and procedures for the reporting of the business and internal
affairs to the Board and to periodically investigate, or cause independent investigation to be made
of, said reports and records;
(e) maintain and implement an adequate and functioning system of internal
legal, financial, and management controls, such that Hut 8’s operations would comply with all
applicable laws and Hut 8’s financial statements and regulatory filings filed with the SEC and
disseminated to the public and the Company’s shareholders would be accurate;
(f) exercise reasonable control and supervision over the public statements
made by the Company’s officers and employees and any other reports or information that the
Company was required by law to disseminate;
(g) refrain from unduly benefiting themselves and other Company insiders at
the expense of the Company; and
(h) examine and evaluate any reports of examinations, audits, or other financial
information concerning the financial affairs of the Company and to make full and accurate
disclosure of all material facts concerning, inter alia, each of the subjects and duties set forth
above.
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55. Each of the Individual Defendants further owed to Hut 8 and the shareholders the
duty of loyalty requiring that each favor Hut 8’s interest and that of its shareholders over their own
while conducting the affairs of the Company and refrain from using their position, influence or
knowledge of the affairs of the Company to gain personal advantage.
56. At all times relevant hereto, the Individual Defendants were the agents of each other
and of Hut 8 and were at all times acting within the course and scope of such agency.
57. Because of their advisory, executive, managerial, directorial, and controlling
positions with Hut 8, each of the Individual Defendants had access to adverse, non-public
information about the Company.
58. The Individual Defendants, because of their positions of control and authority, were
able to and did, directly or indirectly, exercise control over the wrongful acts complained of herein,
as well as the contents of the various public statements issued by Hut 8.
CONSPIRACY, AIDING AND ABETTING, AND CONCERTED ACTION
59. In committing the wrongful acts alleged herein, the Individual Defendants have
pursued, or joined in the pursuit of, a common course of conduct, and have acted in concert with
and conspired with one another in furtherance of their wrongdoing. The Individual Defendants
caused the Company to conceal the true facts as alleged herein. The Individual Defendants further
aided and abetted and/or assisted each other in breaching their respective duties.
60. The purpose and effect of the conspiracy, common enterprise, and/or common
course of conduct was, among other things, to: (i) facilitate and disguise the Individual Defendants’
violations of law, including breaches of fiduciary duty, unjust enrichment, waste of corporate
assets, gross mismanagement, abuse of control, and violations of the Exchange Act; (ii) conceal
adverse information concerning the Company’s operations, financial condition, legal compliance,
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future business prospects and internal controls; and (iii) to artificially inflate the Company’s stock
price.
61. The Individual Defendants accomplished their conspiracy, common enterprise,
and/or common course of conduct by causing the Company purposefully or recklessly to conceal
material facts, fail to correct such misrepresentations, and violate applicable laws. In furtherance
of this plan, conspiracy, and course of conduct, the Individual Defendants collectively and
individually took the actions set forth herein. Because the actions described herein occurred under
the authority of the Board, each of the Individual Defendants who is a director of Hut 8 was a
direct, necessary, and substantial participant in the conspiracy, common enterprise, and/or
common course of conduct complained of herein.
62. Each of the Individual Defendants aided and abetted and rendered substantial
assistance in the wrongs complained of herein. In taking such actions to substantially assist the
commission of the wrongdoing complained of herein, each of the Individual Defendants acted with
actual or constructive knowledge of the primary wrongdoing, either took direct part in, or
substantially assisted in the accomplishment of that wrongdoing, and was or should have been
aware of his or her overall contribution to and furtherance of the wrongdoing.
63. At all times relevant hereto, each of the Individual Defendants was the agent of
each of the other Individual Defendants and of Hut 8 and was at all times acting within the course
and scope of such agency.
HUT 8’S CODE OF CONDUCT
64. Hut 8’s Code of Conduct “sets basic requirements for business conduct and serves
as a foundation for Company policies, procedures and guidelines, all of which provide additional
guidance on expected behaviors. Specifically, the Code of Conduct was “designed to promote
integrity and deter wrongdoing. The Company expects all representatives to adhere to the highest
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ethical standards and uphold corporate values and principles, which include honesty, integrity and
respect for others[.]”
65. Hut 8’s Code of Conduct applies to “[e]very Company director, officer, employee
and other personnel that the Company may determine should be subject to this Code of Business
Conduct and Ethics, such as contractors or consultants (each a “Covered Person”)[.]” (Emphasis
on original.)
66. Under the heading “Consequences for Violations,” the Code of Conduct provides
that:
Any violation of the Code of Business Conduct and Ethics, including fraudulent
reports, may result in disciplinary action including termination of employment for
cause or termination of service and, if warranted, legal proceedings. Violations
include violation of the Code of Business Conduct and Ethics or another Company
policy or procedure, violation of applicable laws, rules or regulations, deliberate
failure to promptly report a violation or withhold relevant information concerning
a violation, refusal to cooperate in the investigation of a known or suspected
violation without valid legal reason or taking action against anyone who reports a
violation or breach of any of the above.
67. Under the heading “ Standards for Good Professional Ethics,” the Code of Conduct
provides:
All of the Company’s business activities and affairs must be carried out ethically
and honestly. The Company expects all Covered Persons to conduct themselves
with honesty and integrity and to avoid even the appearance of improper behavior.
Anything less is unacceptable and may be treated as a serious breach of duty.
68. Under the heading “Ensure Financial Integrity,” the Code of Conduct states the
following, in relevant part:
The Company is committed to the transparency and integrity of publicly filed
financial reports and other communications. Covered Persons must do their part to
ensure that the Company’s public disclosure is full, fair, accurate, timely and
understandable.
Always act responsibly and exercise sound judgment regarding matters involving
the Company’s finances. Keep accurate, complete and timely records, and submit
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accurate and complete reports. Do not mislead, manipulate or improperly influence
the Company’s finance team or external auditors or make any false or misleading
statements or omissions in the Company’s public disclosure. Covered Persons
should not personally enter into any side agreements or other informal
arrangements, written or oral, related to the Company.
69. Under the heading, “Disclosure,” the Code of Conduct states the following, in
relevant part:
It is the responsibility of every Covered Person to:
i. recognize situations in which they have a conflict of interest, or might
reasonably be seen by others to have a conflict
ii. disclose that conflict in writing to management of the Company as soon as
it is identified; and
iii. take such further steps as may be appropriate to remedy the actual or
perceived conflict of interest.
Do not use the Company’s opportunities, information or property for personal gain.
Covered Persons are prohibited from competing with the Company, directly or
indirectly, and owe a duty to the Company to advance the legitimate interests of the
Company when the opportunity arises. Each Covered Person involved in the
development of research, inventions, products or services that relate to the
Company’s existing or anticipated products, that relate to Company duties or that
are developed using Company resources, are subject to the obligations set out in
this Code of Business Conduct and Ethics.
70. Under the heading, “Comply with Laws,” the Code of Conduct states the following,
in relevant part:
Always follow applicable laws, rules and regulations and do not engage in any type
of illegal, unethical, fraudulent or corrupt business practices for any reason. The
Company expects each Covered Person to understand the legal and regulatory
requirements applicable to his or her business unit and areas of responsibility.
Insider Trading
Covered Persons must comply with applicable insider trading laws, which
generally prohibit buying or selling securities of the Company while in possession
of material non-public information about the Company. See the Insider Trading
Policy for more detail.
71. In violation of the Code of Conduct, the Individual Defendants (as key officers and
as members of the Company’s Board) conducted little, if any, oversight of the Company’s
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engagement in the Individual Defendants’ scheme to issue materially false and misleading
statements to the public, and to facilitate and disguise the Individual Defendants’ violations of law,
including breaches of fiduciary duty, gross mismanagement, abuse of control, waste of corporate
assets, unjust enrichment, and violations of the Exchange Act, and aiding and abetting thereof.
Moreover, two of the Individual Defendants violated the Code of Conduct by engaging in insider
trading. Also, in violation of the Code of Conduct, the Individual Defendants failed to comply with
laws and regulations, conduct business in an honest and ethical manner, and properly report
violations of the Code of Conduct.
HUT 8’S AUDIT COMMITTEE CHARTER
72. The Company also maintains an Audit Committee Charter (the “Audit Charter”)
which “sets forth the purpose, composition, authority and responsibility of the Audit Committee
(the “Committee”) of the Board. Specifically, the Audit Committee’s purpose is to assist the Board
in its oversight of:
• the quality and integrity of the Company’s financial statements and related
information, including the Company’s accounting and financial reporting
processes and the audit of the Company’s financial statements;
• the independence, qualifications, appointment and performance of the
Company’s external auditor (the “external auditor”);
• the Company’s disclosure controls and procedures, internal control over
financial reporting, and management’s responsibility for assessing and
reporting on the effectiveness of such controls;
• the organization and performance of the Company’s internal audit function;
• the Company’s compliance with applicable legal and regulatory requirements;
and
• the Company’s enterprise risk management processes.
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73. Regarding the Company’s responsibilities with respect to Financial Reporting, the
Audit Charter states that the Audit Committee shall have the following responsibilities and duties:
• Prepare an audit committee report to be included in the Company’s annual
proxy circular.
• Prior to their public disclosure, review and discuss with management and, if
applicable, the external auditor or the internal auditor:
i. the Company’s annual financial statements and the related MD&A,
including the discussion of critical accounting estimates under the
Generally Accepted Accounting Principles (“GAAP”) included therein
and, if appropriate, recommend to the Board the approval, filing and
disclosure of such information;
ii. the Company’s annual earnings press releases, including any pro forma
or nonGAAP information included therein;
iii. the Company’s quarterly unaudited financial statements and associated
MD&A, including the discussion of critical accounting estimates
included therein;
iv. the Company’s quarterly earnings press releases, including any pro
forma or nonGAAP information included therein;
v. the type and presentation of financial information and earnings guidance
provided to analysts, ratings agencies and others;
vi. to the extent they include financial information extracted or derived
from the Company’s financial statements, other public reports or filings
by the Company, including the Company’s annual report on Form 10-
K and proxy circular;
vii. internal controls (or summaries thereof) and the integrity of the financial
reporting and related attestations by the external auditor of the
Company’s internal control over financial reporting;
viii. any significant difficulties encountered during the course of the audit,
including, but not limited to, any restrictions on the scope of work or
access to required information; and
ix. the Company’s guidelines and policies governing the process of risk
assessment and risk management.
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74. Under the heading “Financial Reporting Processes, Accounting Policies and
Internal Controls,” the Audit Charter states that the Audit Committee shall have the following
responsibilities and duties:
• Review and discuss with management and the external auditor and internal
auditor, and monitor, report and where appropriate, provide recommendations
to the Board on:
i. the adequacy and effectiveness of the Company’s system of internal
control over financial reporting, including any significant deficiencies
and significant changes in internal controls;
ii. the integrity of the Company’s external financial reporting processes;
iii. the Company’s disclosure controls and procedures, including any
significant deficiencies in or material non-compliance with, such
controls and procedures; and
iv. the relationship of the Committee with other committees of the Board
and management.
• Understand the scope of the external auditors’ review of internal control over
financial reporting and obtain reports on significant findings and
recommendations, together with management responses.
• Review and discuss with the Company’s Chief Executive Officer (the “CEO”)
and CFO the process for the certifications to be provided and receive and review
any disclosure from the CEO and CFO made in connection with the required
certifications of the Company’s quarterly and annual reports filed, including:
(i) any significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the Company’s ability to record, process, summarize,
and report financial data; and (ii) any fraud, whether or not material, that
involves management or other employees who have a significant role in the
Company’s internal controls.
• Review major issues and analyses prepared by management or the external
auditor or internal auditor regarding accounting principles and financial
reporting issues and judgments made in connection with the preparation of
financial statements, including any significant changes in the Company’s
selection or application of accounting principles, the effect of non-GAAP
methods on the financial statements, complex or unusual transactions and
highly judgmental areas, such as the presentation and impact of significant risks
and uncertainties and key estimates and judgments of management that may be
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material to financial reporting, the effect of regulatory and accounting
initiatives, as well as off balance sheet structures, on the financial statements of
the Company, major issues as to the adequacy of the Company’s internal
controls and any special audit steps adopted in light of material control
deficiencies.
• Review and discuss with the independent auditors (outside of the presence of
management) how the independent auditors plan to handle their responsibilities
under the Private Securities Litigation Reform Act of 1995, and request
assurance from the independent auditors that Section 10A(b) of the Exchange
Act has not been implicated.
• Discuss with the independent auditors those matters brought to the attention of
the Committee by the independent auditors pursuant to Auditing Standard No.
1301, Communications with Audit Committees, as amended (“AS 1301”).
• Based on the Committee’s review and discussions (1) with management of the
audited financial statements, (2) with the independent auditors of the matters
required to be discussed by AS 1301, and (3) with the independent auditors
concerning the independent auditor’s independence, the Committee shall make
a recommendation to the Board as to whether the Company’s audited financial
statements should be included in the Company’s Annual Report on Form 10-K
for the last fiscal year.
• Review and discuss with the independent auditors the report required to be
delivered by such auditors pursuant to Section 10A(k) of the Exchange Act.
• Approve transactions between the Company and its officers, directors, principal
shareholders and affiliates, in accordance with the terms of the Company’s
Code of Business Conduct and Ethics and Related Person Transactions Policy.
• Review the Company’s policies and procedures for reviewing and approving or
ratifying related-party transactions as set forth in the Related Person
Transactions Policy.
• Review the Company’s policies and procedures for monitoring compliance
with the Code of Business Conduct and Ethics.
• Review the Company’s procedures for reviewing reports of whistleblowing as
set forth in the Whistleblower Policy.
• Review any reports of whistleblowing, including all reports made to the
Company’s anonymous and confidential helpline, with the Company’s counsel
in accordance with the Whistleblower Policy.
• Establish and oversee procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
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controls or auditing matters, including procedures for confidential, anonymous
submissions by employees regarding questionable accounting or auditing
matters.
• Meet periodically with management in the absence of the external auditor.
• Consider the risk of management’s ability to override the Company’s internal
controls.
• At least annually, review, with the Company’s legal counsel and accountants,
all legal, tax, or regulatory matters that could have a significant impact on the
Company’s financial statements. Review the effectiveness of the system for
monitoring compliance with laws and regulations and the results of
management’s investigation and follow-up of any instances of non‐
compliance. Receive and review periodic reports from the Company with
respect to the Company’s pending or threatened material litigation. Review
the appropriateness of the disclosure thereof in the documents reviewed by the
Committee.
• Discuss the Company’s policies with respect to risk assessment and risk
management, including cybersecurity, the Company’s insurance and fidelity
bond coverage, as well as the Company’s major financial risk exposures, the
steps management has undertaken to control them, and any reports of the
internal auditor concerning such matters.
• Review the Company’s compliance with internal policies and the Company’s
progress in remedying any material deficiencies that could have a significant
impact on the Company.
• Review the findings of any examinations by regulatory agencies, and any
external auditors observations made regarding those findings.
• Review the internal accounting department’s budget and staffing.
• Establish systems for the regular reporting to the Committee by each of the
Company’s management, external auditors and internal accounting department
of any significant judgments made by management in the preparation of the
financial statements and the opinions of each as to appropriateness of such
judgments.
75. In violation of the Audit Charter, the Individual Defendants (as key officers and
members of the Company’s Board) caused the Company to issue materially false and misleading
statements to the public, facilitated and disguised the Individual Defendant’s violations of law,
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including breaches of fiduciary duty, gross mismanagement, abuse of control, waste of corporate
assets, unjust enrichment, violations of the Exchange Act, and aiding and abetting thereof. Also,
in violation of the Audit Committee Charter, the Individual Defendants failed to implement risk
assessment and risk management protocol and failed to ensure the Company’s compliance with
applicable law.
THE INDIVIDUAL DEFENDANTS’ MISCONDUCT
Background
76. Hut 8 is a cryptocurrency mining company that provides digital asset mining and
high-performance computing infrastructure solutions in Canada. The Company claims to be a
“leading innovator” and the “first company to operate computing infrastructure across sites that
mines Bitcoin and delivers cloud, colocation, and high-performance computing services to our
enterprise customers.” Additionally, Hut 8 manages services, engages in energy arbitrage, and
operates traditional data centers.
77. Before the Merger, in December 2022, USBTC acquired a 50% interest in King
Mountain Joint Venture, a joint venture bitcoin mining production facility in King Mountain,
Texas. King Mountain was previously owned by TZRC LLC (“TZRC”). For the three months
ended September 30, 2023, the King Mountain Joint Venture posted self-mining revenue of $6.7
million, hosting services revenue of $13.3 million, and cost reimbursement revenue of $12.3
million.
78. On February 6, 2023, Legacy Hut and USBTC entered an agreement proposing an
all-stock merger. On November 30, 2023, Legacy Hut and USBTC completed the Merger,
whereby each Legacy Hut shareholder received 0.2 shares of Hut 8 common stock, while each
USBTC shareholder received 0.6716 shares of Hut 8 common stock. On December 4, 2023, Hut
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8 shares began trading on the NASDAQ. As a result of the Merger, King Mountain Joint Venture
became a part of the Company.
79. During the Relevant Period, the Individual Defendants breached their fiduciary
duties throughout the Relevant Period by personally making and/or causing the Company to make
to the investing public a series of materially false and misleading statements regarding the
Company’s business, operation, and prospects. Specifically, the Individual Defendants willfully
or recklessly made and/or caused the Company to make false and misleading statements that failed
to disclose, inter alia, that: (1) one of USBTC’s biggest shareholders was an “undisclosed related
party;” (2) USBTC’s main asset and premier mining location, King Mountain Joint Venture, which
became the property of Hut 8 by dint of the Merger, was not a financially stable asset, since it
historically failed to provide energy and high-speed internet – core necessities for a data mining
venture; (3) King Mountain Joint Venture had certain interest expenses that were not properly
accounted for, making it appear as if King Mountain Joint Venture would be more profitable to
Hut 8 than it actually was; (4) the profitability of certain USBTC assets was exaggerated; and (5)
as a result, the Merger posed a significant risk to Hut 8’s financial stability. As a result of the
foregoing, the Company’s public statements were materially false and misleading and/or lacked a
reasonable basis at all relevant times.
False and Misleading Statements
November 9, 2023 Prospectus
80. On November 9, 2023, the Company filed the Prospectus in connection with the
Merger. Regarding USBTC, the Prospectus stated in relevant part:
USBTC has several revenue streams: self-mining, hosting, managed infrastructure
operations and equipment sales. Self-mining refers to all USBTC-owned machines
that contribute computing power to mining pools in exchange for Bitcoin. Hosting
refers to USBTC operating third party-owned machines at its sites in exchange for
a hosting fee. Managed infrastructure operations refers to USBTC operating third-
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party-owned Bitcoin mining sites, leveraging its purpose-built site management
software along with the curtailment platform, in exchange for a property
management fee. Equipment sales refers to USBTC selling mining or infrastructure
equipment to third-parties.
USBTC owns and operates a Bitcoin mining facility in Niagara Falls, New York
with access to approximately 50 MW of electricity (the “Alpha Site”). In December
2022, USBTC acquired from Compute North Member LLC (“CN Member”) their
entire membership interest in TZRC LLC, representing 50% of all issued and
outstanding membership interests in the King Mountain JV with NextEra. The King
Mountain JV owns a Bitcoin mining site in Upton County, Texas with access to
approximately 280 MW of electricity (the “Echo Site”). The Echo Site is co-located
behind-the-meter at a wind farm.
(Emphasis in original.)
81. The Prospectus also detailed the energy output that would be available to the
Company as a result of the Merger. Specifically, the Prospectus stated, in relevant part:
Renewable energy sources powering USBTC’s owned and operated sites include
renewable energy and zero carbon emission energy from wind, hydro, and nuclear
sources. As of June 30, 2023:
• Alpha Site at Niagara Falls is fueled by a minimum of approximately 91%
zero carbon emission energy sources;
• Charlie Site in Nebraska is powered by more than 56% zero carbon
emission sources, including 42.3% nuclear, 7.4% wind and 6.4% hydro; and
• The Echo facility at King Mountain is co-located behind the meter at a wind
farm, and at peak wind generation periods can draw up to 100% of the
energy the wind project produces to power mining and hosting; the rest of
the time, the energy is sourced from ERCOT which includes more than 40%
zero carbon emission sources.
82. Under the heading “Risks Related to the Business Combination,” the Prospectus
described the risk of disruptions of Internet connection and the impact those disruptions could have
on the Company’s business. Specifically, the Prospectus stated the following:
USBTC may face risks of Internet disruptions, which could have an adverse
effect on the price of Bitcoin.
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A disruption of the Internet may affect the use of Bitcoin and subsequently the
value of USBTC’s securities. Generally, Bitcoin and USBTC’s business of mining
digital assets is dependent upon the Internet. A significant disruption in Internet
connectivity could disrupt a currency’s network operations until the disruption is
resolved and have an adverse effect on the price of Bitcoin and USBTC’s ability
to contribute computing power to pools that mine Bitcoin.
(Emphasis added.)
83. The Prospectus provided certain of USBTC’s historical consolidated financial data
for the year ended June 30, 2023. In particular, the Prospectus reported $82,160,000 in total
revenue and a net loss of $65,611,000, or $1.52 per share.
December 11, 2023 Press Release
84. On December 11, 2023, Hut 8 issued a press release announcing the Company’s
“Operations Update for November 2023.” The press release stated that as of November 2023, Hut
8 had: (1) a total energy capacity of 839 megawatts under management; (2) 207,399 total deployed
miners under management; (3) 75,078 deployed miners self-mining; (4) 166,775 deployed miners
under management for managed services, and (5) 76,737 deployed miners under management for
hosting:
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December 19, 2023 Form 10-Q
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85. On December 19, 2023, Hut 8 filed its quarterly report on Form 10-Q with the SEC
for the third quarter ended September 30, 2023 (the “Q3 2023 10-Q”). The Q3 2023 10-Q reported
the following about the King Mountain Joint Venture, in relevant part:
On December 6, 2022, one of USBTC’s subsidiaries acquired a 50% membership
interest in the King Mountain JV and assumed the King Mountain JV’s senior Note
(the “King Mountain JV Senior Note”). USBTC acquired the 50% membership
interest through a competitive auction process in connection with the Chapter 11
bankruptcy filing of Compute North. The King Mountain JV has self-mining and
hosting operations at the King Mountain location. USBTC has concluded that
the King Mountain JV will be accounted for with the equity method of
accounting. USBTC’s 50% portion of monthly distributions from the King
Mountain JV will be swept to pay down the King Mountain JV Senior Note. For
additional information on the King Mountain JV Senior Note, see below.
Self-mining revenue, hosting services revenue and cost reimbursement revenues
for the King Mountain JV was $6.7 million, $13.3 million and $12.3 million,
respectively, for the three months ended September 30, 2023, which represented
100% of the King Mountain JV’s revenue during the period.
(Emphasis added.)
86. Under the heading “Related Party Transactions,” the Q3 2023 10-Q stated:
Related parties are defined as entities related to the Company’s directors or main
shareholders as well as equity method investment entities. The Company provides
services to TZRC, an equity method investment entity (refer to Note 9 for
additional information on the equity method investment entity), in exchange for
fees under a PMA.
(Emphasis added.)
87. The Q3 2023 10-Q also provided a summarized consolidated income statement of TZRC
(which is essentially King Mountain JV’s income):
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88. Under Note 10, the Q3 2023 10-Q provided a summary of TZRC (King Mountain
Joint Venture’s) promissory notes as of September 30, 2023 and June 30, 2023, respectively:
January 5, 2024 Press Release
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89. On January 5, 2024, Hut 8 issued a press release announcing the Company’s
“Operations Update for December 2023.” The press release stated that as of December 2023, the
Company had: (1) a total energy capacity of 839 megawatts under management; (2) total deployed
miners of 205,759 under management; (3) 73,943 deployed miners self-mining; (4) 166,347
deployed miners under management for managed services; and (5) 76,734 deployed miners under
management for hosting.
90. The statements in paragraphs ¶¶ 80-89 above were materially false and/or
misleading and failed to disclose material adverse facts about the Company’s business, operations,
and prospects. Specifically, the identified statements failed to disclose that: (1) one of USBTC’s
biggest shareholders was an “undisclosed related party;” (2) USBTC’s main asset and premier
mining location, King Mountain Joint Venture, which became the property of Hut 8 by dint of the
Merger, was not a financially stable asset, since it historically failed to provide energy and high-
speed internet – core necessities for a data mining venture; (3) King Mountain Joint Venture had
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certain interest expenses that were not properly accounted for, making it appear as if King
Mountain Joint Venture would be more profitable to Hut 8 than it actually was; (4) the profitability
of certain USBTC assets was exaggerated; and (5) as a result, the Merger posed a significant risk
to Hut 8’s financial stability. As a result of the foregoing, the Company’s public statements were
materially false and misleading and/or lacked a reasonable basis at all relevant times.
The Truth Emerges
J Capital Report
91. On January 18, 2024, the truth about the Merger was revealed when J Capital
Research published J Capital Report. The J Capital Report revealed that Defendant Ho may be
hiding ownership shares through his partner, Anna Kudrjasova (“Kudrjasova”) who was a
significant investor of USBTC through “her company,” Anaya Capital Corp. As such, the J Capital
Report stated that Anaya Capital Corp. appears to hold approximately 3.7 million USBTC shares,
which is “particularly significant[] because Ho has committed to a lock-up of 65% of his shares –
but not hers.” Specifically, the J Capital Report revealed that:
We believe he is hiding his true ownership through his life partner, a related party.
Anna Kudrjasova, a significant investor in USBTC through “her company,” Anaya
Capital Corp., appears to be Michael Ho’s personal partner and therefore may be
hiding his interest in New Hut. This is particularly significant, because Ho has
committed to a lock-up of 65% of his shares – but not hers. Anaya Capital appears
to hold about 3.7 mln shares. The only rationale we can see if Anaya is being
used as a conduit is to dump shares quietly.
(Emphasis on original.)
92. The J Capital Report further presented evidence that Defendant Ho and Kudrjasova
are long-term associates, as they both listed the same address located in Dubai, United Arab
Emirates (“UAE”). Specifically, the J Capital Report provided that:
Documents for different companies list the same address for Ho and Kudrjasova,
in Dubai at 5709 Cayan Tower, Dubai Marina, Dubai, UAE 643671.
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“(31) Anna Kudrjasova has sole voting and dispositive power over the securities
held for the account of this selling stockholder, as director. The selling
stockholder’s address is 5709 Cayan Tower, Dubai Marina, Dubai, UAE
643671.”
“21 The address that Michael Ho gave as President, Secretary, and Treasurer of
both Kairos and Ingenium Global Inc. – 5709 Cayan Tower in Dubai – is
different from the address he gave to the State of Florida in registering Prive.”
The Hut 8 S-4 acknowledges that Kudrjasova lives in Dubai but lists her address as
1202, Al Barsha Heights, Teacom, Dubai Marina, Dubai, United Arab Emirates, a
hotel and managed apartment property. Michael Ho’s location is given as Dubai
but without a street address. This suggests to us that Hut 8 management may be
hiding the nature of their relationship.
(Emphasis on original.)
93. The J Capital Report also noted that the King Mountain Joint Venture “has
historically failed to provide energy and high-speed internet—unquestionably the two most
important inputs for mining Bitcoin.” The J Capital Report expands upon this by stating, in relevant
part:
We are highly skeptical of the King Mountain JV accounts. When USBTC paid
about $105 mln for a 50% interest in this joint venture from TZRC LLC,44 King
Mountain’s owners were bankrupt and the JV without cash and only partially
operational, according to bankruptcy filings.
On November 23, 2022, MARA, which was the largest customer for the King
Mountain site, filed a motion stating that Compute North at King Mountain had
failed to energize its miners and failed to provide an adequate internet
connection.
⁎ ⁎ ⁎
MARA also said that there was a lack of high-speed connection at the facility. We
wonder how anyone is able to mine without energy and without high-speed internet.
⁎ ⁎ ⁎
USBTC itself was so disgruntled that it filed suit. Just one month before buying
the King Mountain JV, USBTC filed an action against CN King Mountain LLC
for failing to find a location where miners could be installed and energized.
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⁎ ⁎ ⁎
Our diligence suggests that the facility now uses a Starlink satellite network instead
of a broadband connection to access the internet. This is unheard of in the Bitcoin
mining industry. Starlink is an expensive and unreliable choice for mining at scale.
Said one interviewee who managed a large data center when asked if he would ever
use Starlink as primary internet source for Bitcoin mining at scale, he said “never.”
⁎ ⁎ ⁎
King Mountain, TX JV (“Echo”)
The King Mountain JV has been plagued with connectivity problems. In its 2023
Annual Report, published on March 16, 2023, MARA reported “the company
experienced significant production downtime in the second and third quarters . . .
and delays in energization at King Mountain.” MARA had 60,000 miners at the
facility, but according to a Proof of Claim MARA filed in the Compute North
bankruptcy case, the miners were never energized. MARA’s Statement of Claim
said that King Mountain lacked a high-speed internet connection.
(Emphasis added.)
94. The J Capital Report also highlighted that Hut 8 overstated its profitability by
failing to consider “interest expenses” that it incurred in a specific period. Specifically, the J
Capital Report stated that:
The company is misleading on the profitability of the JV, with accounts showing
$665,000 of profit while completely ignoring about the $3.2 mln interest expense
incurred during the same period.
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95. The J Capital Report further disputed the figures that Hut 8 provided in its monthly
Operations Updates, especially regarding the number of miners that Hut 8 employs. Specifically,
the J Capital Report stated, in relevant part:
We are confused about how many miners USBTC has. The November 2023 Hut 8
operations update claims that USBTC had 46,225 Bitcoin miners deployed for
October 2023, and yet at the end of September 2023, USBTC reported operating
only 30,200 miners.
We find this ramp-up extremely unlikely, especially without disclosing new
machine orders or deposits for new miners in USBTC’s end September 2023
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balance sheet. Remaining construction in progress was far less than the typical
purchase value for that many extra machines. Is USBTC telling the truth?
96. The J Capital Report also identified an individual who was “highly familiar” with
USBTC and maintained that without the Merger, USBTC would have initiated a structured
bankruptcy. Specifically, the J Capital Report provided that:
One person highly familiar with USBTC told us, “without the merger, [USBTC]
would have done a structured bankruptcy.” Why then did HUT pay $745 mln
to acquire this company and its planned payments? Even worse, we estimate a value
for USBTC that’s as much as 70% less. Typically, such egregious over-payments
occur only when management is being enriched[.]
97. Under the heading “Is Hut 8 the biggest dupe on the exchange? Or did it collude
with its merger partner? If Hut 8 had waited one month, USBTC might have been bankrupt,” the
J Capital Report stated that:
“The merger was a complete godsend for USBTC,” someone deeply involved
with the company told us. Without the merger, this person said, USBTC would
have been bankrupt within weeks. “It was very much in the cards.”
In early 2023, USBTC gave up almost half its miners, plus $20.7 mln and some
other assets, in an apparent default.
Our interviewee said that USBTC “begged” NYDIG to forgive the loan but soon
after Christmas was forced to surrender assets. Hut 8 managed to characterize this
default as a $23.7 mln GAIN on debt extinguishment. But it had started out as a
$24.2 mln LOSS that the company “fixed” through an accounting sleight of hand.
Abracadabra!
(Emphasis on original.)
98. The J Capital Report concluded by discussing the value of USBTC at the time of
the Merger and Hut 8’s potential overpayment by stating that “we estimate a value for USBTC
that’s as much as 70% less. Typically, such egregious over-payments occur only when
management is being enriched.” Further the J Capital Report provided that:
We are highly skeptical that the King Mountain JV is worth the $105 mln paid
by USBTC, given reports that the center at the time lacked both reliable power and
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internet. Nevertheless, we assign what we believe to be an aggressive $105 mln
valuation – the price USBTC paid for the facility. This is despite MARA’s recent
purchase of Granbury and Kearney, which indicates that the King Mountain JV
would be worth only $64 mln.
Our valuation of USBTC’s Managed Infrastructure Operations (MIO)
business is $51 mln, a generous 3x forward revenue.
⁎ ⁎ ⁎
In total, we value the USBTC operating assets at the high end at $219 mln. Not
only do we suspect that USBTC overpaid for the King Mountain JV, but Hut
8 overpaid again, by a factor of four, for the same facility, along with the
Niagara mining facility and the two managed-facility contracts. New Hut
issued 49.7 mln shares in exchange for all USBTC stock – a value of about $495
mln at the time. Hut 8 also took on $160 mln in net debt plus around $90 mln in
planned spending commitments ($40 mln for AI equipment and $50 mln in planned
capital expenditure) in exchange for the USBTC and Old Hut assets.
(Emphasis on original.)
99. On this news, the Company’s stock price fell $2.16 per share, or 23.3%, from
closing at $9.28 per share on January 17, 2024 to close at $7.12 per share on January 18, 2024, on
abnormally high trading volume.
DAMAGE TO HUT 8
100. As a direct and proximate result of the Individual Defendants’ conduct, Hut 8 has
lost and will continue to lose and expend many millions of dollars.
101. Such expenditures include, but are not limited to, legal fees, costs, and any
payments for resolution of or to satisfy a judgment associated with the Securities Class Action,
and amounts paid to outside lawyers, accountants, and investigators in connection thereto.
102. Such expenditures also include, but are not limited to, fees, costs, and any payments
for resolution of or to satisfy judgments associated with any other lawsuits filed against the
Company or the Individual Defendants based on the misconduct alleged herein, and amounts paid
to outside lawyers, accountants, and investigators in connection thereto.
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103. Such expenditures will also include costs incurred in any internal investigations
pertaining to violations of law, costs incurred in defending any investigations or legal actions taken
against the Company due to its violations of law, and payments of any fines or settlement amounts
associated with the Company’s violations.
104. Additionally, these expenditures include, but are not limited to, unjust
compensation, benefits, and other payments provided to the Individual Defendants who breached
their fiduciary duties to the Company.
105. As a direct and proximate result of the Individual Defendants’ conduct, Hut 8 has
also suffered and will continue to suffer a loss of reputation and goodwill, and a “liar’s discount”
that will plague the Company’s stock in the future due to the Company’s and their
misrepresentations.
DERIVATIVE ALLEGATIONS
106. Plaintiff brings this action derivatively and for the benefit of Hut 8 to redress
injuries suffered, and to be suffered, as a result of the Individual Defendants’ breaches of their
fiduciary duties as directors and/or officers of Hut 8, gross mismanagement, abuse of control,
waste of corporate assets, unjust enrichment, as well as for contribution under Section 10(b) and
21D of the Exchange Act.
107. Hut 8 is named solely as a nominal party in this action. This is not a collusive action
to confer jurisdiction on this Court that it would not otherwise have.
108. Plaintiff is, and has been at all relevant times, a shareholder of Hut 8. Plaintiff will
adequately and fairly represent the interests of Hut 8 in enforcing and prosecuting its rights, and,
to that end, has retained competent counsel, experienced in derivative litigation, to enforce and
prosecute this action.
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DEMAND FUTILITY ALLEGATIONS
109. Plaintiff incorporates by reference and re-alleges each and every allegation stated
above as if fully set forth herein.
110. A pre-suit demand on the Board of Hut 8 is futile and, therefore, excused. At the
time of filing of this complaint, the Board consists of the following nine individuals: Defendants
Tai, Ho, Genoot, Hefti, Flinn, Shattuck, O’Neal, Wilkinson, and Rickertsen (the “Director
Defendants”). Plaintiff needs only to allege demand futility as to five of the nine Directors that
were on the Board at the time of the filing of this complaint.
111. Demand is excused as to all of the Director Defendants because each one of them
faces, individually and collectively, a substantial likelihood of liability as a result of the schemes
they engaged in knowingly or recklessly to make and/or cause the Company to make false and
misleading statements and omissions of material facts. This renders the Director Defendants
unable to impartially investigate the charges and decide whether to pursue action against
themselves and the other perpetrators of the schemes.
112. In complete abdication of their fiduciary duties, the Director Defendants either
knowingly or recklessly caused or permitted Hut 8 to make the materially false and misleading
statements alleged herein. Moreover, the Director Defendants caused the Company to fail to
maintain internal controls. As a result of the foregoing, the Director Defendants breached their
fiduciary duties, face a substantial likelihood of liability, are not disinterested, and demand upon
them is futile, and thus excused.
113. Additional reasons that demand on Defendant Tai is futile follow. Defendant Tai is
the Company’s Chairman of the Board, and is a member of the Nominating, Environmental, Social
and Governance Committee. As a trusted Company director, he conducted little, if any, oversight
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of the schemes to cause the Company to make false and misleading statements, consciously
disregarded his duties to monitor such controls over reporting and engagement in the schemes, and
consciously disregarded his duties to protect corporate assets. For these reasons, Defendant Tai
breached his fiduciary duties, faces a substantial likelihood of liability, is not independent or
disinterested, and thus demand upon him is futile and, therefore, excused.
114. Additional reasons that demand on Defendant Ho is futile follow. Defendant Ho
has served as a Company director and as the Company’s CSO at all relevant times. Defendant Ho
has received and continues to receive compensation for his role as a director and as CSO as
described above. Thus, he is a non-independent director. As a trusted Company director and as the
Company’s trusted CSO, he conducted little, if any, oversight of the schemes to cause the
Company to make false and misleading statements, consciously disregarded his duties to monitor
such controls over reporting and engagement in the schemes, and consciously disregarded his
duties to protect corporate assets. Additionally, he co-founded USBTC with Defendant Genoot,
whom he shares extensive professional and personal relationships with. For these reasons,
Defendant Ho breached his fiduciary duties, faces a substantial likelihood of liability, is not
independent or disinterested, and thus demand upon him is futile and, therefore, excused.
115. Additional reasons that demand on Defendant Genoot is futile follow. Defendant
Genoot has served as the Company’s CEO since February 6, 2024, when Defendant Leverton was
terminated from that position. He has served as a Company director at all relevant times and
continues to serve as a Company director while CEO. Thus, he is a non-independent director.
Defendant Genoot has received and continues to receive compensation for his role as a director as
described above. As a trusted Company director and the Company’s highest officer, he conducted
little, if any, oversight of the schemes to cause the Company to make false and misleading
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statements, consciously disregarded his duties to monitor such controls over reporting and
engagement in the schemes, and consciously disregarded his duties to protect corporate assets.
Additionally, he co-founded USBTC with Defendant Ho, whom he shares extensive professional
and personal relationships with. For these reasons, Defendant Genoot breached his fiduciary
duties, faces a substantial likelihood of liability, is not independent or disinterested, and thus
demand upon him is futile and, therefore, excused.
116. Additional reasons that demand on Defendant Hefti is futile follow. Defendant
Hefti has served as a Company director at all relevant times. Defendant Hefti also serves as a
member of the Nominating, Environmental, Social and Governance Committee. Defendant Hefti
has received and continues to receive compensation for her role as a director as described above.
As a trusted Company director, she conducted little, if any, oversight of the schemes to cause the
Company to make false and misleading statements, consciously disregarded her duties to monitor
such controls over reporting and engagement in the schemes, and consciously disregarded her
duties to protect corporate assets. For these reasons, Defendant Hefti breached her fiduciary duties,
faces a substantial likelihood of liability, is not independent or disinterested, and thus demand upon
her is futile and, therefore, excused.
117. Additional reasons that demand on Defendant Flinn is futile follow. Defendant
Flinn has served as a Company director at all relevant times. Defendant Flinn also serves as Chair
of the Audit Committee. Defendant Flinn has received and continues to receive compensation for
his role as a director as described above. As a trusted Company director, he conducted little, if any,
oversight of the schemes to cause the Company to make false and misleading statements,
consciously disregarded his duties to monitor such controls over reporting and engagement in the
schemes, and consciously disregarded his duties to protect corporate assets. For these reasons,
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Defendant Flinn breached his fiduciary duties, faces a substantial likelihood of liability, is not
independent or disinterested, and thus demand upon him is futile and, therefore, excused.
118. Additional reasons that demand on Defendant Shattuck is futile follow. Defendant
Shattuck has served as a Company director at all relevant times. He also serves as Chair of the
Compensation and Talent Development Committee and as a member of the Audit Committee.
Defendant Shattuck has received and continues to receive compensation for his role as a director
as described above. As a trusted Company director, he conducted little, if any, oversight of the
schemes to cause the Company to make false and misleading statements, consciously disregarded
his duties to monitor such controls over reporting and engagement in the schemes, and consciously
disregarded his duties to protect corporate assets. For these reasons, Defendant Shattuck breached
his fiduciary duties, faces a substantial likelihood of liability, is not independent or disinterested,
and thus demand upon him is futile and, therefore, excused.
119. Additional reasons that demand on Defendant O’Neal is futile follow. Defendant
O’Neal has served as a Company director at all relevant times. He also serves as a member of the
Audit Committee. Defendant O’Neal has received and continues to receive compensation for his
role as a director as described above. As a trusted Company director, he conducted little, if any,
oversight of the schemes to cause the Company to make false and misleading statements,
consciously disregarded his duties to monitor such controls over reporting and engagement in the
schemes, and consciously disregarded her duties to protect corporate assets. For these reasons,
Defendant O’Neal breached her fiduciary duties, faces a substantial likelihood of liability, is not
independent or disinterested, and thus demand upon her is futile and, therefore, excused.
120. Additional reasons that demand on Defendant Wilkinson is futile follow. Defendant
Wilkinson has served as a Company director at all relevant times. He also serves as a member of
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the Nominating, Environmental, Social, and Governance Committee. Additionally, Defendant
Wilkinson has received and continues to receive compensation for his role as a director as
described above. As a trusted Company director, he conducted little, if any, oversight of the
schemes to cause the Company to make false and misleading statements, consciously disregarded
his duties to monitor such controls over reporting and engagement in the schemes, and consciously
disregarded his duties to protect corporate assets. For these reasons, Defendant Wilksinson
breached his fiduciary duties, faces a substantial likelihood of liability, is not independent or
disinterested, and thus demand upon him is futile and, therefore, excused.
121. Additional reasons that demand on Defendant Rickertsen is futile follow.
Defendant Rickertsen has served as a Company director at all relevant times. He also serves as a
member of the Compensation and Talent Development Committee. Additionally, Defendant
Rickertsen has received and continues to receive compensation for his role as a director as
described above. As a trusted Company director, he conducted little, if any, oversight of the
schemes to cause the Company to make false and misleading statements, consciously disregarded
his duties to monitor such controls over reporting and engagement in the schemes, and consciously
disregarded his duties to protect corporate assets. For these reasons, Defendant Rickertsen
breached his fiduciary duties, faces a substantial likelihood of liability, is not independent or
disinterested, and thus demand upon him is futile and, therefore, excused.
122. Additional reasons that demand on the Board is futile follow.
123. Defendants Flinn, O’Neal and Shattuck served as members of the Audit Committee
during the Relevant Period. In violation of the Audit Committee Charter, Defendants Flinn,
O’Neal, and Shattuck failed to adequately review and discuss the Company’s Q3 2023 10-Q; failed
to adequately exercise their risk management and risk assessment functions; and failed to ensure
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adequate Board oversight of the Company’s internal control over financial reporting, disclosure
controls and procedures, and failed to follow the Audit Committee Charter and the Code of
Conduct. Thus, Defendants Flinn, O’Neal and Shattuck further breached their fiduciary duties, are
not disinterested, and demand is excused as to them.
124. In violation of the Code of Conduct, the Director Defendants conducted little, if
any, oversight of the Company’s engagement in the Individual Defendants’ schemes to cause Hut
8 to issue materially false and misleading statements to the public, and to facilitate and disguise
the Individual Defendants’ violations of law, including breaches of fiduciary duty, unjust
enrichment, abuse of control, gross mismanagement, waste of corporate assets, violations of the
Exchange Act, and the aiding and abetting thereof. In violation of the Code of Conduct, the
Director Defendants failed to avoid conflicts of interest or the appearance of conflicts of interest;
maintain the accuracy of Company records; protect and ensure the efficient use of Company assets;
comply with all applicable laws, rules, and regulations; and properly report violations of the Code
of Conduct and applicable laws, rules, and regulations. Thus, the Director Defendants face a
substantial likelihood of liability and demand is futile as to them.
125. Hut 8 has been and will continue to be exposed to significant losses due to the
wrongdoing complained of herein, yet the Director Defendants have not filed any lawsuits against
the Individual Defendants or others who were responsible for that wrongful conduct to attempt to
recover for Hut 8 any part of the damages Hut 8 suffered and will continue to suffer thereby. Thus,
any demand upon the Director Defendants would be futile.
126. The Individual Defendants’ conduct described herein and summarized above could
not have been the product of legitimate business judgment as it was based on bad faith and
intentional, reckless, or disloyal misconduct. Thus, none of the Director Defendants can claim
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exculpation from their violations of duty pursuant to the Company’s charter (to the extent such a
provision exists). As a majority of the Director Defendants face a substantial likelihood of liability,
they are self-interested in the transactions challenged herein and are not capable of exercising
independent and disinterested judgment about whether to pursue this action on behalf of the
shareholders of the Company. Accordingly, demand is excused as being futile.
127. The acts complained of herein constitute violations of fiduciary duties owed by Hut
8’s officers and directors, and these acts are incapable of ratification.
128. The Director Defendants may also be protected against personal liability for their
acts of mismanagement and breaches of fiduciary duty alleged herein by directors’ and officers’
liability insurance if they caused the Company to purchase it for their protection with corporate
funds, i.e., monies belonging to the stockholders of Hut 8. If there is a directors’ and officers’
liability insurance policy covering the Directors, it may contain provisions that eliminate coverage
for any action brought directly by the Company against the Directors, known as, inter alia, the
“insured-versus-insured exclusion.” As a result, if the Director Defendants were to sue themselves
or certain of the officers of Hut 8, there would be no directors’ and officers’ insurance protection.
Accordingly, the Director Defendants cannot be expected to bring such a suit. On the other hand,
if the suit is brought derivatively, as this action is brought, such insurance coverage, if such an
insurance policy exists, will provide a basis for the Company to effectuate a recovery. Thus,
demand on the Director Defendants is futile and, therefore, excused.
129. If there is no directors’ and officers’ liability insurance, then the Director
Defendants will not cause Hut 8 to sue the Individual Defendants named herein, since, if they did,
they would face a large uninsured individual liability. Accordingly, demand is futile in that event,
as well.
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130. Thus, for all of the reasons set forth above, all of the Directors, and, if not all of
them, at least five of the Directors, cannot consider a demand with disinterestedness and
independence. Consequently, a demand upon the Board is excused as futile.
FIRST CLAIM
Against the Individual Defendants for Breach of Fiduciary Duties
131. Plaintiff incorporates by reference and re-alleges each and every allegation set forth
above, as though fully set forth herein.
132. Each Individual Defendant owed to the Company the duty to exercise candor, good
faith, and loyalty in the management and administration of Hut 8’s business and affairs.
133. Each of the Individual Defendants violated and breached his or her fiduciary duties
of candor, good faith, loyalty, reasonable inquiry, oversight, and supervision.
134. The Individual Defendants’ conduct set forth herein was due to their intentional or
reckless breach of the fiduciary duties they owed to the Company, as alleged herein. The Individual
Defendants intentionally or recklessly breached or disregarded their fiduciary duties to protect the
rights and interests of Hut 8.
135. In breach of their fiduciary duties owed to Hut 8, the Individual Defendants
willfully or recklessly caused the Company to engage in improper cybersecurity practices, and
made and/or caused the Company to make false and/or misleading statements and/or omissions of
material fact that failed to disclose that: (1) one of USBTC’s biggest shareholders was an
“undisclosed related party;” (2) USBTC’s main asset and premier mining location, King Mountain
Joint Venture, which became the property of Hut 8 by dint of the Merger, was not a financially
stable asset, since it historically failed to provide energy and high-speed internet – core necessities
for a data mining venture; (3) King Mountain Joint Venture had certain interest expenses that were
not properly accounted for, making it appear as if King Mountain Joint Venture would be more
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profitable to Hut 8 than it actually was; (4) the profitability of certain USBTC assets was
exaggerated; and (5) as a result, the Merger posed a significant risk to Hut 8’s financial stability.
As a result of the foregoing, the Company’s public statements were materially false and misleading
and/or lacked a reasonable basis at all relevant times.
136. The Individual Defendants further failed to correct and/or caused the Company to
fail to correct the false and/or misleading statements and/or omissions of material fact, which
renders them personally liable to the Company for breaching their fiduciary duties.
137. Also in breach of their fiduciary duties, the Individual Defendants failed to maintain
internal controls.
138. In yet further breach of their fiduciary duties, during the Relevant Period, the
Individual Defendants willfully or recklessly caused the Company to make false and misleading
statements while two of the Individual Defendants engaged in lucrative insider sales, netting
proceeds of over $2 million dollars.
139. The Individual Defendants had actual or constructive knowledge that they had
caused the Company to improperly engage in the fraudulent schemes set forth herein and to fail to
maintain internal controls. The Individual Defendants had actual knowledge that the Company was
engaging in the fraudulent schemes set forth herein, and that internal controls were not adequately
maintained, or acted with reckless disregard for the truth, in that they caused the Company to
improperly engage in the fraudulent schemes and to fail to maintain adequate internal controls,
even though such facts were available to them. Such improper conduct was committed knowingly
or recklessly and for the purpose and effect of artificially inflating the price of Hut 8’s securities.
The Individual Defendants, in good faith, should have taken appropriate action to correct the
schemes alleged herein and to prevent them from continuing to occur.
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140. These actions were not a good-faith exercise of prudent business judgment to
protect and promote the Company’s corporate interests.
141. As a direct and proximate result of the Individual Defendants’ breaches of their
fiduciary obligations, Hut 8 has sustained and continues to sustain significant damages. As a result
of the misconduct alleged herein, the Individual Defendants are liable to the Company.
142. Plaintiff on behalf of Hut 8 has no adequate remedy at law.
SECOND CLAIM
Against Individual Defendants for Unjust Enrichment
143. Plaintiff incorporates by reference and re-alleges each and every allegation set forth
above, as though fully set forth herein.
144. By their wrongful acts, violations of law, and false and misleading statements and
omissions of material fact that they made and/or caused to be made, the Individual Defendants
were unjustly enriched at the expense of, and to the detriment of, Hut 8.
145. The Individual Defendants either benefitted financially from the improper conduct,
or received bonuses, stock options, or similar compensation from Hut 8 that was tied to the
performance or artificially inflated valuation of Hut 8, or received compensation or other payments
that were unjust in light of the Individual Defendants’ bad faith conduct.
146. Plaintiff, as a shareholder and a representative of Hut 8, seeks restitution from the
Individual Defendants and seeks an order from this Court disgorging all profits, including from
insider transactions, benefits, and other compensation, including any performance-based or
valuation-based compensation, obtained by the Individual Defendants due to their wrongful
conduct and breach of their fiduciary and contractual duties.
147. Plaintiff on behalf of Hut 8 has no adequate remedy at law.
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THIRD CLAIM
Against Individual Defendants for Abuse of Control
148. Plaintiff incorporates by reference and re-alleges each and every allegation set forth
above, as though fully set forth herein.
149. The Individual Defendants’ misconduct alleged herein constituted an abuse of their
ability to control and influence Hut 8, for which they are legally responsible.
150. As a direct and proximate result of the Individual Defendants’ abuse of control, Hut
8 has sustained significant damages. As a direct and proximate result of the Individual Defendants’
breaches of their fiduciary obligations of candor, good faith, and loyalty, Hut 8 has sustained and
continues to sustain significant damages. As a result of the misconduct alleged herein, the
Individual Defendants are liable to the Company.
151. Plaintiff on behalf of Hut 8 has no adequate remedy at law.
FOURTH CLAIM
Against Individual Defendants for Gross Mismanagement
152. Plaintiff incorporates by reference and re-alleges each and every allegation set forth
above, as though fully set forth herein.
153. By their actions alleged herein, the Individual Defendants, either directly or through
aiding and abetting, abandoned and abdicated their responsibilities and fiduciary duties with regard
to prudently managing the assets and business of Hut 8 in a manner consistent with the operations
of a publicly-held corporation.
154. As a direct and proximate result of the Individual Defendants’ gross
mismanagement and breaches of duty alleged herein, Hut 8 has sustained and will continue to
sustain significant damages.
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155. As a result of the misconduct and breaches of duty alleged herein, the Individual
Defendants are liable to the Company.
156. Plaintiff on behalf of Hut 8 has no adequate remedy at law.
FIFTH CLAIM
Against Individual Defendants for Waste of Corporate Assets
157. Plaintiff incorporates by reference and re-alleges each and every allegation set forth
above, as though fully set forth herein.
158. The Individual Defendants caused the Company to pay the Individual Defendants
excessive salaries and fees, to the detriment of the shareholders and the Company.
159. As a result of the foregoing, and by failing to properly consider the interests of the
Company and its public shareholders, the Individual Defendants have caused Hut 8 to waste
valuable corporate assets, to incur many millions of dollars of legal liability and/or costs to defend
unlawful actions, to engage in internal investigations, and to lose financing from investors and
business from future customers who no longer trust the Company and its products.
160. As a result of the waste of corporate assets, the Individual Defendants are each
liable to the Company.
161. Plaintiff on behalf of Hut 8 has no adequate remedy at law.
SIXTH CLAIM
Against Defendants Leverton and Visram for Contribution
Under Sections 10(b) and 21D of the Exchange Act
162. Plaintiff incorporates by reference and re-alleges each and every allegation set forth
above, as though fully set forth herein.
163. Hut 8, Defendant Leverton, and Defendant Visram are named as defendants in the
Securities Class Action, which asserts claims under the federal securities laws for violations of
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Sections 10(b) and 20(a) of the Exchange Act, and SEC Rule 10b-5 promulgated thereunder. If
and when the Company is found liable in the Securities Class Action for these violations of the
federal securities laws, the Company’s liability will be in whole or in part due to Defendants
Leverton’s and Visram’s willful and/or reckless violations of their obligations as officers and/or
directors of Hut 8.
164. Defendants Leverton and Visram, because of their positions of control and
authority as officers and/or directors of Hut 8, were able to and did, directly and/or indirectly,
exercise control over the business and corporate affairs of Hut 8, including the wrongful acts
complained of herein and in the Securities Class Action.
165. Accordingly, Defendants Leverton and Visram are liable under 15 U.S.C. § 78j(b),
which creates a private right of action for contribution, and Section 21D of the Exchange Act, 15
U.S.C. § 78u-4(f), which governs the application of a private right of action for contribution arising
out of violations of the Exchange Act.
166. As such, Hut 8 is entitled to receive all appropriate contribution or indemnification
from Defendants Leverton and Visram.
PRAYER FOR RELIEF
FOR THESE REASONS, Plaintiff demands judgment in the Company’s favor against all
Individual Defendants as follows:
(a) Declaring that Plaintiff may maintain this action on behalf of Hut 8, and that
Plaintiff is an adequate representative of the Company;
(b) Declaring that the Individual Defendants have breached and/or aided and
abetted the breach of their fiduciary duties to Hut 8;
(c) Determining and awarding to Hut 8 the damages sustained by it as a result
of the violations set forth above from each of the Individual Defendants, jointly and severally,
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together with pre-judgment and post-judgment interest thereon;
(d) Directing Hut 8 and the Individual Defendants to take all necessary actions
to reform and improve Hut 8’s corporate governance and internal procedures to comply with
applicable laws and to protect Hut 8 and its shareholders from a repeat of the damaging events
described herein, including, but not limited to, putting forward for shareholder vote the following
resolutions for amendments to the Company’s Bylaws or Certificate of Incorporation and the
following actions as may be necessary to ensure proper corporate governance policies:
1. a proposal to strengthen the Board’s supervision of operations and develop
and implement procedures for greater shareholder input into the policies and
guidelines of the Board;
2. a provision to permit the shareholders of Hut 8 to nominate at least five
candidates for election to the board; and
3. a proposal to ensure the establishment of effective oversight of compliance
with applicable laws, rules, and regulations.
(e) Awarding Hut 8 restitution from the Individual Defendants, and each of
them;
(f) Awarding Plaintiff the costs and disbursements of this action, including
reasonable attorneys’ and experts’ fees, costs, and expenses; and
(g) Granting such other and further relief as the Court may deem just and
proper.
JURY DEMAND
Plaintiff hereby demands a trial by jury.
Dated: April 5, 2024 THE BROWN LAW FIRM, P.C.
/s/ _Timothy Brown______
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Timothy Brown
Saadia Hashmi
767 Third Avenue, Suite 2501
New York, NY 10017
Telephone: (516) 922-5427
Facsimile: (516) 344-6204
Email: tbrown@thebrownlawfirm.net
shashmi@thebrownlawfirm.net
Counsel for Plaintiff
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Case 1:24-cv-02542-GHW Document 9 Filed 04/05/24 Page 58 of 58
VERIFICATION
I, Jeffrey Thompson, am a plaintiff in the within action. I have reviewed the allegations
made in this Shareholder Derivative Amended Complaint, know the contents thereof, and
authorize its filing. To those allegations of which I have personal knowledge, I believe those
allegations to be true. As to those allegations of which I do not have personal knowledge, I rely
upon my counsel and their investigation and believe them to be true.
I declare under penalty of perjury that the foregoing is true and correct. Executed this
__
5thday of April, 2024.
______________________
Jeffrey Thompson