Bitcoin miner allegedly manipulated stock markets with overhyped merger

Germany's markets watchdog is looking for a win after failing to detect epic fraud at Wirecard. Now, it's eyeing Bitcoin miner Northern Data.

Regulators are circling Bitcoin company Northern Data over its acquisition of US-based crypto miner Whinstone, reports Bloomberg.

The Frankfurt-based firm — which previously did business as Northern Bitcoin — purchased Whinstone in 2019 in an all-stock deal.

Northern Data announced the merger shortly after Whinstone began work on a new 100-acre, one-gigawatt Bitcoin mining facility in Texas.

At the time, the company pegged the plant as the “world’s largest Bitcoin mining facility.”

However, Germany’s Federal Financial Supervisory Authority (BaFin) alleges that Northern Data overvalued the deal.

Per Financial Times, Northern Data predicted revenues of €120 million to €140 million ($138.7 million to $161.8 million) and an operating profit of €45 million to €60 million ($52 million to $69.3 million).

When the company revealed figures last week, the figures were well below the mark: €16.4 million ($19 million) revenue (nearly 90% less) with an operating loss of €12.3 million ($14.2 million).

Northern Data stock has floundered all year.

Northern Data stock fell up to 45% after BaFin filed its complaint last week. It has since rebounded, now sitting at around 25% below its pre-complaint share price.

Northern Data’s market value currently sits at $1.27 billion.

Northern Data says offloading Whinstone proves it’s all good

BaFin copped flak for not detecting the impending collapse of German payment processor Wirecard last year.

So, the markets watchdog no doubt hopes allegations of market manipulation against Northern Data stick.

But Northern Data, which counts among its investors German magic mushroom king Christian Angermayer, isn’t taking the claims lying down.

It blamed the disparity on its failure to realize revenues with two of its major customers — Bitfield and Decentric.

In a statement released via its website on Tuesday, the company added:

We reject the allegations made therein, in particular of market manipulation. We are confident that we will clarify the matter in full cooperation with the authorities.

Northern Data also pointed its recent sale of Whinstone to Riot Blockchain for $80 million and 11.8 million Riot shares (now worth $310 million) as proof of “the high value of the acquisition.”

This isn’t the first time Northern Data has been accused of fudging facts.

Last year, an article posted to Medium claimed the company was playing down its reliance on Bitcoin miners.