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Riot Blockchain Announces “Material Weaknesses” in Financial Reporting Controls and Says It “May Never Become Profitable”

May 24, 2019 Blog

Riot Blockchain, a publicly-traded Bitcoin and Litecoin mining company previously known as Bioptix, recently announced that its auditors had found “material weaknesses” in the company’s internal controls for financial reporting. The cryptocurrency company, which reported holding more than $41.6 million in cash at the end of 2017, also reported that it currently has just over $225,000 in liquid capital. Last year, it generated just $7.7 million in revenue from Bitcoin and Litecoin mining.

In an article published by CNBC, firm founder and cryptocurrency fraud attorney Jake Zamansky is quoted as saying that, “[t]he internal control problems they cite go to the heart of the business.” During his interview, Mr. Zamansky also stated that he “absolutely” believes that the Securities and Exchange Commission (SEC) will be looking into Riot Blockchain’s internal control deficiencies. According to the independent auditor’s report contained in the company’s most-recent 10k filing:

“[Riot Blockchain] has a significant working capital deficiency, has incurred significant losses, and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the [c]ompany’s ability to continue as a going concern.”

These concerns have led the company itself to acknowledge that, “[W]e may never become profitable . . . [and e]ven if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.”

CNBC Identifies “Red Flags” While SEC Alleges Former CEO’s Involvement in “Lucrative Market Manipulation Schemes”

The recent CNBC article follows the news organization’s February 2018 investigation in which it found a number of “red flags” which potentially suggest that the cryptocurrency company was aware of its financial troubles despite keeping this information from investors. These red flags included:

  • Last-minute postponement of annual meetings
  • Sales of company stock by insiders shortly after the company’s name change from Bioptix to Riot Blockchain
  • Dilutive share issuances that benefited large investors to the detriment of smaller investors
  • Unclear SEC filings
  • Sale of shares by a major investor while other people were aggressively investing in the company

Six months after CNBC published the results of its investigation, the SEC announced that it was charging 10 people in connection with alleged “lucrative market manipulation schemes” that resulted in over $27 million in unlawful stock sales, including Riot Blockchain’s then-CEO John O’Rourke. While Riot Blockchain’s stock price reached an all-time-high of more than $40 per share during the Bitcoin craze of 2017, it began plummeting last year, and as of early May 2019 the company is trading at just over $4 per share.

Investment Fraud Lawyers for Cryptocurrency Investors

The recent publicity surrounding cryptocurrency has led many individual investors to put their money into complex and highly-speculative investments that they do not fully understand. Unfortunately, it has also led to the perpetration of numerous scams targeting cryptocurrency investors and those seeking to ride the wave of cryptocurrency companies such as Riot Blockchain.

If you have lost money in cryptocurrency investments and would like to speak with an investment fraud attorney about your legal rights, you can call 212-742-1414 or contact us online for a free initial consultation.

Client Reviews

“Jake Zamasky and his colleagues represented me in a FINRA arbitration case against a large multinational bank and succeeded in obtaining an award for the full amount of my investment losses. I would highly recommend the Zamansky firm for their experience in securities litigation, their level of detailed research and case preparation, and their ability to effectively fight for what’s right.”

Richard R.

“Throughout my entire case, Jake Zamansky was incredibly responsive and spent time walking me through each step of the process. He is professional and worked with my challenging schedule, even meeting with me nights and on weekends. He knew exactly which turn to take when it came to my case and yet was respectful of any decisions I wanted to make resulting in a positive outcome.”

Donald A.

“Jake Zamansky and his firm represented me in a FINRA arbitration case to recover investment losses. Jake and his team were very professional and worked very hard preparing for trial and then reaching a substantial settlement of our case. I would highly recommend them.”

William E.

“Jake Zamansky represented me in a FINRA arbitration case which allowed me to recover a substantial portion of investment losses. He is truly an expert in this space and I would highly recommend him to those investors who may have been been a victim of investment fraud.”

Chris K.

“Jake and his team did a great job communicating with me throughout the process of my lawsuit. I would recommend him to anyone looking to sue UBS for unethical practices.”

Mike A.
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