MGT Capital Faces Lawsuit Over Penny Stock Pumps

Published on 03 October 2018 by Cryptovest Staff

Introduction

Much like the movement of Bitcoin (BTC) prices, the price of MGTI stock rose to a peak around $7 in December 2017, and went on to slide, crashing to current levels of around $0.13. This is typical behavior of penny stocks that affects other small-scale companies on the OTC markets. However, blockchain-based companies had their special day of attention, adding to the risk.

Actions en justice et enquête de la SEC

In addition to the class action lawsuit by former MGTI owners, the firm is under investigation by the US Securities and Exchange Commission (SEC) for pumping the stock price in a concerted campaign. The SEC has tracked penny stock companies for the past few years, in an attempt to curb stock pumps related to hot and overhyped business models, including marijuana stocks.

Allégations de manipulation et implication de John McAfee

While MGTI seems to be a legitimate mining operation, the central problem was the hyping of the stock price and the mining facility in Washington with the help of John McAfee. In the fall of 2018, pictures of McAfee on the mining facility grounds were circulating, as more mining facilities were deployed to use the hydroelectric power of Washington.

MGTI ended its relationship with McAfee, issuing an officialstatementin January 2018.

Opérations de minage et impact sur le réseau Bitcoin

MGTI is also affected by the rising hashrate and difficulty on the Bitcoin network. In an earlierdisclosure, MGTI announced its participation in the mining ecosystem as follows:

“Operating in facilities in Washington State, MGT Capital Investments, Inc. (OTCQB: MGTI) ranks as one of the largest U.S. based Bitcoin miners. MGT oversees the operation of approximately 6,800 Bitmain S9 miners, and 50 GPU-based Ethereum mining rigs.”

Comparaison avec d’autres entreprises OTC

Previously, Riot Blockchain (OTCQB:RIOT) also faced a class action lawsuit. The price movement closely recalls that of MGTI.

Other OTC companies or pink-sheet stocks using the “blockchain” word in their title include Blockchain Solutions, Inc. (BLSC), as well as Blockchain Industries, Inc. (BCII), both with an SEC warning and no information disclosure.