Bitcoin Miner IREN Faces Class-Action Lawsuit Over Misrepresentation of Computing Capabilities

IREN, formerly known as Iris Energy, is facing a class-action lawsuit from investors who allege the cryptocurrency mining company misrepresented its high-performance computing (HPC) capabilities.

The lawsuit, led by Paul Williams-Israel, was filed in a New York federal court on October 7, accusing IREN of misleading claims about its Childress, Texas, facility.

The central claim of the lawsuit is that IREN’s Childress facility was portrayed as an HPC-ready data center, which it allegedly was not.

IREN Allegedly Overstated its Computing Capacity

According to the complaint, IREN overstated its computing capacity and misrepresented the site’s readiness for HPC operations.

The misrepresentation, the plaintiffs argue, came from a June 2023 statement in which IREN announced the expansion of the Childress site and a renewed focus on its HPC strategy.

The complaint alleges that this statement was “materially false and misleading” because it exaggerated the company’s potential in the HPC sector.

The lawsuit contends that the facility in Childress lacked the necessary infrastructure to serve as a proper data center for high-performance computing.

Williams-Israel claims that he and other investors would not have invested in the company had they known the true state of the facility, suggesting that IREN’s share price was “artificially and falsely inflated” by these statements.

The lawsuit names IREN’s co-founders and co-CEOs, Daniel and William Roberts, as well as Chief Financial Officer Belinda Nucifora, as defendants.

It further accuses IREN of failing to properly test its “proven” air cooling system designed to prevent overheating at the Childress facility.

Culper Says IREN’s Air Cooling Technology was Not Tested in Texas

A critical piece of evidence cited in the complaint is a report from short-selling firm Culper Research, released on July 11.

The report claims that IREN’s air cooling technology was only tested in British Columbia, Canada, rather than in Texas, where temperatures are consistently “20 to 40 degrees [Fahrenheit] hotter year-round.”

Culper, which holds a short position on IREN, accused the company of making ambitious claims about its HPC capabilities while investing insufficiently in the required infrastructure.

The report compared IREN’s approach to “claiming to win the Monaco Grand Prix, but arriving at the track in a Toyota Prius.”

The lawsuit seeks to recover damages from IREN and its executives, with the amount to be determined at a jury trial.

IREN has yet to respond to requests for comment on the matter.

The legal trouble has impacted IREN’s stock performance, with shares falling 6.71% on October 9, closing at $7.51, though the stock remained stable in after-hours trading, according to Google Finance data.

Despite this drop, IREN’s stock has seen a 10.44% increase year-to-date.

The company’s market capitalization currently stands at $1.42 billion, making it the seventh-largest Bitcoin miner by market cap.

In August, investment firm Bernstein made a bullish call on the Bitcoin mining sector, issuing “outperform” ratings for four publicly traded companies , including Riot Platforms, CleanSpark, IREN, and Core Scientific.