Nearly a dozen investors are suing Rhodium Enterprises for alleged fraud and “schemes of deception and brazen self-dealing,” a Texas District Court filing from Tarrant County reveals.
Eleven plaintiffs are bringing the case against Rhodium Cofounders and Co-CEOs, Nathan Nichols and Chase Blackmon; CTO, Cameron Blackmon; Cofounder and CFO, Nicholas Cerasuolo; and Imperium Investment Holdings, a private equity firm that held 62% of Rhodium’s economic interests as of November 16, 2021, according to an S-1 filing for Rhodium’s since-scrapped IPO.
The case centers on Whinstone, the Rockdale, Texas mining facility that hosted Rhodium ASIC miners and which Northern Data sold to Riot Platforms in 2021. The plaintiffs specifically argue that Rhodium “misled and lied” to investors by not disclosing the sale of the facility and intentionally withholding information about the deal, which they allege was under contract at the time of investment.
The plaintiffs are seeking monetary and non-monetary relief, the former of which “far exceeds $1,000,000,” the filing reads.
“Frankly, it is hard to imagine a more material disclosure event, and had Defendants disclosed this critical information, as they were required by law, Plaintiffs would not have invested in the first place. Defendants intentionally and wrongfully withheld this crucial fact (i.e., that [Whinstone] would be owned by a direct competitor of Rhodium) to secure Plaintiffs’ multi-million-dollar investment in Rhodium Encore,” the filing states.
It continues to claim that the “wildly dysfunctional and adversarial relationship between Rhodium and Riot (which includes shutdowns led by Riot’s armed security) is one of, if not the, key reasons behind Rhodium’s bankruptcy filing.” As reported by Blockspace, Rhodium filed for Chapter 11 bankruptcy in August of this year. Court documents reveal that the company’s estimated liabilities are between $50-100 million and the value of its assets $100-500 million.
The Plaintiffs also alleged that Rhodium and Imperium engaged in self-dealing when it shuffled economic interests between two Rhodium entities, Rhodium Encore and Rhodium Enterprises. “Defendants and Imperium directly benefitted from the Roll-up Transaction which, in essence, left Plaintiffs structurally subordinated to Imperium’s recoveries and gave Imperium an over-inflated ‘control premium’ as part of the Roll-up Transaction,” the suit reads.
In addition to this latest lawsuit, Rhodium is locked in a legal battle with Riot over its Whinstone hosting agreement. Riot is seeing $26 million in damages through the litigation, while Rhodium has filed a counterclaim for $67 million in damages.
Rhodium did not respond to Blockspace’s request for comment by press time.
Header image of Fort Worth, Texas courthouse by Fallon Michael via Unsplash.
