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Riot Blockchain faces two investor suits claiming the company’s October 2017 name change was done to drive up stock prices, even though the firm lacked substantive cryptocurrency investments.
Riot Blockchain Inc., formerly Bioptix Inc., used its name change to attract cryptocurrency investors despite not having a meaningful cryptocurrency business plan, according to the two complaints, one filed Feb. 22 in the U.S. District Court for the District of Colorado and the other filed Feb. 17 in the U.S. District Court for the District of New Jersey.
Riot Blockchain focused on animal health and veterinary products prior to its name change, the complaints said.
The investors sued after a CNBC investigation revealed Riot Blockchain wasn’t meaningfully involved in the cryptocurrency business, despite its name change and resulting fourfold increase in price per share, according to the complaints. The company’s stock dropped 33.37 percent after the story’s publication.
The company twice canceled its annual stockholder meeting and never intended to actually hold it, the complaints said.
Riot Blockchain representatives didn’t immediately respond to requests for comment. The company’s CEO, John O’Rourke, called the story that spawned the complaints “a garbage, biased hit piece,” according to a Bloomberg report. Riot Blockchain cited its ownership of cryptocurrency mining machines and investment in a Canadian digital currency exchange in a release responding to the CNBC story.
Securities and Exchange Commission Chairman Jay Clayton in January 2018 warned companies against securities sales related to blockchain name changes when they had “no meaningful track record in pursuing the commercialization of distributed ledger or blockchain technology.”
The cases are Greenawalt v. Riot Blockchain Inc. , D. Colo., No. 1:18-cv-00440, complaint filed 2/22/18 and Takata v. Riot Blockchain Inc. , D.N.J., No. 3:18-cv-02293, complaint filed 2/17/18 .
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