Stronghold Digital class action to proceed following court approval

The miner is accused of misleading investors about its mining capacity and cost of operations, in direct violation with sections of the US Securities Act

article-image

Pressmaster/Shutterstock, modified by Blockworks

share

A federal court in New York has allowed a class action lawsuit to proceed against crypto mining firm Stronghold Digital, over allegations the company misled investors in its initial public offering (IPO).

Lead plaintiff Mark Winter alleges Stronghold’s registration statement and prospectus contained materially false and misleading information about the company’s mining operations. That included its ability to generate revenue, according to a court order filed Thursday.

The lawsuit claims Stronghold misled investors about a certain supplier’s contract failure and the performance of their bitcoin miners, violating sections of the US Securities Act.

Specifically, Winter alleges Stronghold overstated its hash rate, which is a measure of the computing power of its mining equipment, while also understating its costs of production.

As a result of the alleged misrepresentations, plaintiffs argue they suffered damages when they purchased Stronghold stock at an artificially inflated price. 

Stronghold first filed its IPO with the SEC in July 2021 before going public via the Nasdaq stock exchange three months later. Stronghold was initially listed at $26.50 per share under the ticker $SDIG, marking a 55% increase over the expected range of $16 to $18 per share. 

SDIG was up more than 10% on the day to $8.08. The stock is up more than 87% year-to-date alongside most other competitors, though remains down more than 98% from its 2021 peak of $357, exchange data shows.

Stronghold’s defense

The bitcoin miner, along with its key executives, filed a motion to dismiss the lawsuit in December of last year. 

“This entire case is premised on the illogical notion that a supplier’s failure to fulfill a contract with a company — subsequent to that company disclosing the risk of that very issue —  somehow renders those disclosures materially false and misleading,” the company said in its December motion.

Stronghold acknowledged on Nov. 8, 2021, that it wouldn’t be able to obtain supplier MinerVa miners in line with the delivery schedule. This was followed by an earnings call on Nov. 30, where the company disclosed it had only 240 MV7 miners on hand but expressed it would receive all 15,000 miners within the first quarter of the following year. 

The severity of the delivery problems and the discrepancy in numbers wasn’t fully revealed until March 2022, according to the filing Thursday.

“Because plaintiffs have identified at least one actionable misstatement or omission in the offering materials, the complaint survives the motion to dismiss,” Judge Ronnie Abrams wrote in the document.

Stronghold did not immediately return a request for comment.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates.png

Research

Content Delivery Networks (CDNs) represent low-hanging fruit in a massive market ripe for Web3-driven disruption. The global CDN market was valued at ~$28B in 2024, and is projected to surpass $140B by 2034, (18.75% CAGR) underscoring the immense demand for efficient content delivery.

article-image

US dollars might technically be worth less, but it’s still good news

article-image

Apps are doing well, as is casino gaming, says Tom Schmidt of Dragonfly

article-image

Sponsored

Machine DeFi brings programmable peer-to-peer finance into contact with tangible machines that generate real-world value

article-image

What happens to your investment portfolio when the companies driving returns are no longer in it?

article-image

Wow, the ETF hype sure didn’t last long

article-image

The private sector lost 33,000 jobs in June; analysts had projected payrolls to add 100,000 positions