Hut 8 did not admit wrongdoing under the proposed settlement and has denied that it violated the law or caused losses to investors.
The lawsuit followed a January 2024 short-seller report by J Capital Research that challenged Hut 8’s statements about the USBTC merger and alleged problems at King Mountain. Hut 8’s share price fell after the report, and investors later sued, asserting claims under the Securities Act of 1933 and the Securities Exchange Act of 1934.
The litigation had already been narrowed before the settlement. In September, Judge Marrero dismissed the investors’ Exchange Act claims and also rejected Securities Act claims tied to alleged misstatements about USBTC’s financial condition before the merger. But he allowed part of the Securities Act case to proceed over alleged omissions related to risks at King Mountain.
In asking the court to preliminarily approve the settlement, lead plaintiff Abhishek Maheshwari said the deal provides investors with immediate recovery while avoiding the risk that Hut 8 could still defeat the case. The memorandum said the defendants had indicated they would seek judgment on the pleadings by challenging traceability, arguing that registered and unregistered shares were commingled after the merger, making it difficult for aftermarket purchasers to trace their shares to the registration statement.
Plaintiff counsel estimated that the $2.35 million settlement represents about 19.6% of the maximum recoverable damages of roughly $12.08 million. The filing described that recovery as above recent averages for Securities Act-only settlements.
The proposed settlement was reached after mediation. According to the filing, the parties took part in a full-day virtual mediation session on May 7 before JAMS mediator Jed Melnick. The session did not immediately produce an agreement, but the parties later accepted a mediator’s proposal on May 13 and entered into a formal stipulation dated June 18.
