TLDR
- Northern Data, a European bitcoin mining firm, is fighting a whistleblower lawsuit filed by two former executives.
- The company filed a motion to dismiss the case, calling it “bad faith litigation.”
- The ex-employees allege Northern Data lied about its financial health and committed tax evasion.
- Northern Data claims the plaintiffs were terminated for cause and are seeking to profit from false allegations.
- The company is reportedly considering a U.S. IPO for its AI unit, valued at up to $16 billion.
European bitcoin mining firm Northern Data is pushing back against a whistleblower lawsuit filed by two former executives, calling the allegations “false” and “financially motivated.” The company has filed a motion to dismiss the case in a California court, describing it as a “textbook example of bad faith litigation.”
The lawsuit, filed by ex-employees Gulsen Kama and Joshua Porter, alleges that Northern Data lied to investors about its financial condition and committed tax evasion. The plaintiffs claim they were wrongfully terminated after raising concerns about these issues to their supervisors.
In its motion to dismiss, Northern Data argues that the California court lacks jurisdiction over the case, as the company’s U.S. subsidiaries are incorporated in Delaware and based in Virginia. The mining firm also contends that the fraud claims lack sufficient detail and specificity.
Northern Data’s lawyers stated in the filing that Kama was fired for cause, and Porter was laid off due to “lack of productivity.” They further alleged that when the ex-employees made “extortionate demands for ‘severance’ payments,” the company rejected them, leading to the current lawsuit.
The motion also points out that this is not Kama’s first whistleblower suit against a former employer. In 2019, she filed a similar case against tax preparer Jackson Hewitt, and in 2023, she sued Quest Diagnostics for workplace discrimination.
The allegations come at a sensitive time for Northern Data, as we recently reported that the company is considering a U.S. initial public offering (IPO) of its artificial intelligence unit, potentially valuing it at up to $16 billion.
The company’s lawyers noted in their filing that “the period leading up to an IPO is a particularly sensitive time for a company,” and that “public accusations of fraud – no matter how irresponsible – can disrupt that process.”
In their lawsuit, Kama and Porter alleged that Northern Data had a
“$30 million German tax liability and additional liabilities of almost $8 million while simultaneously having only $17 million cash on the balance and a monthly burn rate of $3-$4 million.”
They also claimed the company committed “rampant tax evasion” in its early years with no plan to address it, potentially leaving them liable for “tens of millions of dollars” in U.S. tax liabilities if audited.
A spokesperson for Northern Data strongly refuted these allegations, stating,
“It is no coincidence that these allegations from disgruntled former employees were publicized just days after unconfirmed media speculation that the company is evaluating a potential capital markets event and just ahead of the publication of our 2023 accounts.”
The company maintains that it is “well capitalized” and has a “very robust growth plan,” with revenue expected to more than triple in 2024. Northern Data also announced a 20% capital increase, aiming to raise €214 million ($233 million) through the issuance of new shares.
The funds will be used to enhance its cloud platform and expand data centers in Europe and the United States.
A hearing to discuss the motion to dismiss is scheduled for August 19, 2024, in a Los Angeles court.
