Cryptocurrency mining company SupplyBit has been hit with a class action from an investor who claimed the company broke Illinois securities law by allegedly surreptitiously selling him and others millions of dollars worth of unregistered securities and allegedly reneged on promises to pay investors what they were allegedly owed.
Michael E. Gumprecht LLC, which is headquartered in Georgia, claims SupplyBit, founded by defendant Michael Groff, offered a service called "hedge mining" through its website, claiming to provide an easy and safe way to mine Bitcoin without risks, according to a complaint filed in Cook County Circuit Court on Oct. 18.
The plaintiff claims hedge mining was not actual mining, but a financial product and SupplyBit's mining-services agreement entitled purchasers to "theoretical earnings" in exchange for the purchase price, determined by the mining power bought and the price per unit of power.
The MSAs allowed holders to share actual proceeds generated by SupplyBit's mining operations. However, the agreements allegedly did not require SupplyBit to operate specific mining equipment, and it could comply without operating any mines, according to the suit.
In March 2023, SupplyBit abruptly stopped its mining operations and investors were displeased, according to the suit. In May, SupplyBit stopped paying the plaintiff altogether.
The plaintiff claims in June, it sent a letter to SupplyBit demanding a refund for more than $2.8 million allegedly owed.
The plaintiff is seeking compensatory damages.
Plaintiffs are represented by attorneys Michael Kanovitz and Stephen Weil, of Loevy & Loevy, in Chicago; and Charles Gerstein, of Gerstein Harrow in Washington, D.C.