Marathon Digital Top Executives Sued for Breaching Fiduciary Duties

Marathon Digital has been accused by its key shareholders of violating fiduciary duties to enrich the top executives. In a submission presented before the district court of Nevada, the shareholders blame the chief executive of Marathon Digital, Fred Thiel, and other top officials for orchestrating projects to enrich themselves. The shareholders lamented that the top executive’s action had resulted in the misuse of corporate assets.

Marathon Digital Faces Legal Charges

Guided by the core principles of Marathon Digital, the disheartened shareholders observed that Thiel and his colleague’s actions were not in the best interest.

Marathon Digital is a crypto mining firm listed under the Nasdaq ticker symbol “MARA.” The mining company has risen to become the world’s second-largest holder of Bitcoin (BTC).

Reflecting on a court filing, the CEO and nine other top executives are accused of committing five crimes. The report revealed that the accused violated the US Securities and exchange act which is punishable under the law.

Additionally, the complaint alleges that the executive violated the fiduciary duties and engaged in activities that resulted in the misuse of corporate resources. The court report mentioned the suspects involved in activities that yielded unjust enrichment.

The complaint requested the court to take potential action against the CEO, Merrick Okamoto, Hugh Gallagher, and Simeon Salzman for engaging in wrongdoings that violate the securities and federal law.

Marathon Shareholders Calls for Restructuring of the Board of Management

In a separate report, the troubled shareholders explained the reason that prompted them to take legal action. The complaint stressed the need for the Marathon Digital board of management to supervise the mining company’s operation. The plaintiff underscored the significance of restructuring the board to constitute at least four shareholders.

In addition, the shareholder proposed the amendment of the existing electorate procedure for appointing directors.

A scrutiny of the operation of Marathon Digital illustrated that the management has been downplaying some of the challenges facing the crypto mining company. The reluctance of the management to tackle real problems has subjected the value of Marathon assets to plummet.

From the shareholder’s legal team report, it was evident that the Marathon management supported activities that failed to add more value to the firm. The shareholders complained that the management engaged in excessive compensation.

The management provided falsified documents to receive high rewards, which was against the company’s principles. The management is also accused of insider sales of Marathon’s assets.

Notably this was not the first time Marathon was caught on the wrong side of the law. A few months ago, the SEC issued a subpoena related to establishing a 100-megawatt data center in Montana. The SEC instructed the crypto miners to provide reports concerning the facilities under scrutiny.

Marathon Reveal Next Plans

Initially, the SEC had issued a subpoena to Marathon in 2021 to investigate whether the mining company violated federal law when establishing its facility in Montana. Since then the mining company agreed to cooperate with SEC investigations.

Besides the regulatory pressure battling the crypto miner, the company has been exploring ways to reduce losses. In May, the CEO explained a new strategy adopted by Marathon to minimize the loss from $12.9 million reported in Q1 of 2022 to $7.2 million this year.

Irrespective of this  Marathon managed to reduce its outstanding debt. In March, Marathon paid loan balance to Silvergate and terminated the credit facilities. The settlement of the Silvergate loan resulted in the release of 3132 Bitcoin held by the bank as collateral.