Class-Action Suit Against Crypto Miner Iris Energy Quickly Withdrawn

A class-action lawsuit against Iris Energy (IREN), the bitcoin miner that last month said some of its mining equipment isn't producing enough cash to meet its financing obligations, was withdrawn a day after it was filed.

The suit was filed in the U.S. District Court for the District of New Jersey on Dec. 7 and withdrawn on Dec. 8, court documents show.
The suit had alleged that Iris Energy repeatedly gave out materially false information and misled investors, starting with the documentation for the firm's 2021 initial public offering. Those documents were negligently prepared and failed to disclose certain of the mining machines, "owned through its Non-Recourse SPVs [non-recourse special purpose vehicles], were unlikely to produce sufficient cash flow to service their respective debt financing obligations," the suit said.
Iris Energy continued to mislead investors throughout 2022 as its shares were traded on the Nasdaq, the claimant had alleged. The miner downplayed the severity of its debt and sought to assure investors by playing up its strategy of "operational efficiency and securing additional financing," the suit said.
However, some of the company's procured hardware was unlikely to produce enough cash to service the associated debt, so Iris Energy's debt was not as sustainable as presented, which would in turn have a material effect on the company's operations and financials, the withdrawn lawsuit alleged.
On Nov. 2, Iris Energy revealed that it was in discussions to restructure over $100 million of equipment loans because the machines in question did not produce enough cash to service the debt. The firm later received default notices on that debt, and said the mining machines will likely be seized by the lender.
On Nov. 18, Iris had to unplug the related equipment. That took out 3.6 EH/s of computing power offline, cutting IREN's average hashrate to 1.4 EH/s in November.
Because the debt was held by Non-recourse SPVs, Iris Energy's co-founder and co-CEO Dan Roberts has reportedly argued that it is incorrect to say that the miner defaulted on its obligations.
In its latest monthly update released on Tuesday, Iris Energy said it is considering selling 0.4 EH/s of machines.

UPDATE (DEC. 13, 13:54 UTC): Adds details and summation of CEO interview.

UPDATE (DEC. 14, 08:40 UTC): Adds that complaint was withdrawn in headline, first paragraph.

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Sheldon Reback

Sheldon Reback is a CoinDesk news editor based in London. He owns a small amount of ether.

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Eliza Gkritsi

Eliza Gkritsi is CoinDesk's crypto mining reporter.

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