A new complaint was filed against Iris Energy (IREN) by shareholder (plaintiff) Paul Williams on October 7, 2024, in the U.S. District Court for the Eastern District of New York. The defendants in the complaint are the company, co-founders and CEOs Daniel Roberts and William Roberts, and CFO Belinda Nucifora.
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The plaintiff alleges that he bought IREN stock at artificially inflated prices between June 20, 2023 and July 11, 2024 (the “Class Period”) and is now seeking compensation for his financial losses. To learn more about the lawsuit click here.
Iris Energy operates next-generation data centers that are completely powered by renewable energy. The company claims that its facilities are optimized for Bitcoin (BTC-USD) mining, AI cloud services, and other power-dense compute.
The filed complaint alleges that during the Class Period, the defendants misled Iris Energy investors in violation of Sections 10(b) and 20(a) of the Securities Exchange Act.
Plaintiff’s Allegations
According to the complaint, Iris Energy intentionally misrepresented information presented in its financial statements. In particular, the defendants allegedly overstated the company’s prospects in data centers and high-performance computing (HPC).
In June 2023, IREN announced its expansion into HPC, saying that it is “now a parallel focus,” with its traditional emphasis on cryptocurrency mining operations. The company added that it expects its facility at Childress, Texas, to provide ~13.6 EH/s of data center capacity.
Further, in the annual report filed on September 20, 2023, Iris Energy stated that its “purpose-built” data center offered operational advantages like optimized cooling designs for HPC. Also, during a call on the same day, IREN’s executive claimed that the company had “proven” its data center design.
Iris Energy’s Misrepresentations
In contrast to the claims made by Iris Energy and its executives, the company had not yet established whether it could meet the intense cooling needs of an HPC facility in Texas. The company operated only in crypto mining and didn’t gain experience in the HPC space. Also, IREN’s executives were allegedly aware that they had yet to showcase their ability to manage a Texas-based location, given that all of the company’s previous facilities were in British Columbia.
The truth came out on July 11, 2024, when Culper Research published a report titled “Iris Energy Ltd (IREN): A Prius at the Grand Prix.” Culper disclosed its short position in IREN stock, stating that it believed the company misrepresented its facilities’ potential for HPC applications. The report mainly noted multiple technical problems at Iris Energy’s facilities, especially at Childress, making them inadequate for HPC.
IREN stock declined over 13% in reaction to the report.
To conclude, the defendants allegedly misled investors about the company’s HPC capabilities, inducing shareholders to buy the stock. While IREN stock is up on a year-to-date basis, shares have plunged 58% over the past three years, causing massive damage to shareholder returns.
