Canaan Slapped with Class-Action Lawsuit for Dubious IPO Practices

, a leading crypto mining hardware maker, has been hit with a class-action lawsuit in the United States for violating securities law.
Brought by the investors of the initial public offering (IPO) of the company, the lawsuit has been filed at the United States District Court for the District of Oregon on March 4.

The class-action lawsuit alleged that the Chinese company misled the investors by providing false information about the financial health and operation status of the company in the IPO filings with the Securities and Exchange Commission (SEC).
Filled by Bragar Eagel & Squire, a law firm specializing in shareholders’ rights, the lawsuit primarily alleged that the hardware manufacturer received an order of $150 million worth Canaan’s miners a month before the IPO filings from a Hong Kong-based company.
However, on the paper, the company’s only had a market cap of $50 million with $16 million in cash in hand, creating serious doubts about Canaan’s business.
Notably, the chairman of the Hong Kong firm also owns 9.7 percent of Canaan’s outstanding shares through various entities he controls – the information which Canaan did not disclose to its IPO investors.
Per the class-action lawsuit, the Canaan’s financial conditions were much worse than that was reported by the company and also raised doubts on reported clients of the company as most of them were not from the digital asset mining industry. Canaan also removed numerous distributors from its website just before the IPO.
Complicit to Canaan?
Apart from Canaan, the lawsuit also named Galaxy Digital, China Renaissance Securities, Huatai Financial Holdings, CMB International Capital and a few other firms, making them defendants. Notably, Credit Suisse, a lead underwriter of Canaan’s IPO, dropped out days before the SEC filing.
Last November, Canaan sold 10 million American depositary shares for $9 apiece each at the bottom of their market range, which was kept between $9 to $11, in the process.
The shares, however, tanked in the open market shading around 49 percent of its value within days. Last month its in a day, however, the price was soon corrected – the last trading price being $4.83.