Bitcoin Miner Ionic Faces Challenge From Disgruntled Shareholders – Decryption

Cryptocurrency exchange Figure Markets is mobilizing Ionic Digital shareholders, organizing efforts via social media to shake up the Celsius-linked Bitcoin miner’s board of directors.

Ionic, a Texas-based mining company, emerged from Celsius’ bankruptcy as a company wholly owned by the bankrupt lender’s creditors. The company became operational in February, aim to operate 127,000 mining machines at five different sites in North America.

After a week and a half of lobbying, enough Ionic shares were pledged to Figure to force a board meeting, according to CEO Mike Cagney. In an interview with DecryptSoFi’s co-founder and former CEO said shareholders are fed up with Ionic’s current direction.

“The Celsius community is very motivated, very organized, and they’re very angry,” he said, referring to Ionic’s 86,000 shareholders. “The board of directors of this company is simply not acting on behalf of shareholders, and so we want to step in and change that.”

At the same time, Cagney said Figure has a “dual motivation” in pushing for changes to Ionic’s board. The company believes Ionic could list on Figure’s alternative trading system (ATS), becoming the first public stock to trade natively on the blockchain.

The deal would provide liquidity to Ionic shareholders, who have navigated a difficult bankruptcy process following Celsius’s abrupt collapse, Cagney said. So far, Celsius creditors have received $2.5 billion in crypto and cashwith 15% of payments including Ionic Actions.

A formal notice letter shared with Decryptwhich was sent to Ionic’s CLO, raises allegations of “apparently self-serving behavior” among the company’s board members. Calling the delay in Ionic’s IPO plans “serious and unreasonable,” it demands that the company’s records be produced to “investigate possible wrongdoing, mismanagement, conflicts of interest and corporate waste.”

Figure’s move in a new direction comes as Ionic’s leadership undergoes self-directed changes.

Former Ionic CEO Matt Prusak left the company last month. The former CCO of US Bitcoin Corp, a company that merged with Hut 8 last year, declined to extend his term as Ionic’s chief executive, according to a company press releaseAt the same time, Ionic announced that the company’s CFO, John Penver, would be appointed interim CEO to “ensure a smooth transition.”

On X, Penver recognized He added that the company had had “limited communications” with Ionic shareholders. He said, however, that Ionic had created a new communications website and was “pleased” with the progress made in deploying mining assets and developing its Cedarvale, Texas, site.

However, Penver said the company’s IPO plans hit a snag as the company’s auditor, RSM US, resigned, stifling the process associated with one of Ionic’s main goals.

“Simply put, without an auditor, we cannot update our SEC filings and resume the process of becoming a publicly traded company,” he said, adding that Ionic is currently evaluating several companies for the position and a decision will likely be made in the coming weeks.

Along with Ionic’s announcement that Prusak is ending his tenure as CEO, the company said it has appointed new members to its board of directors. Scott Flanders, the former CEO of Playboy Enterprises, and Mac Gardner, the chairman of the board of Spirit Airlines, completed replacing Hut 8 CEO Asher Genoot and New York University professor Max Holmes.

“It should never have existed”

One of Ionic’s Bitcoin mining facilities is based in Cedarvale and is currently under development by Hut 8. The publicly traded mining company also operates Ionic’s four other Bitcoin facilities under terms of a recently renegotiated agreement.

Ionic said In early August, Ionic announced it had amended its management services agreement with Hut 8, removing a liquidity delay clause from the deal. Under that clause, Cagney said, Ionic could have terminated the agreement if it wasn’t listed on a stock exchange or an ATS by June.

“Shareholders had absolutely no incentive to forgo this liquidity provision,” Cagney said, arguing that the provision created an opportunity for an orderly liquidation if the IPO plans stalled.

Moments after this story was initially published, Ionic responded to Decryptresponded to the request for comment and provided the following comment:

“The company is fully committed to becoming a publicly traded entity, although it has taken longer than initially anticipated,” said John Penver, Ionic’s interim CEO. Decrypt“We understand that many shareholders want their shares to be liquid and have not chosen to become Celsius shareholders, which has led to some frustration. That said, providing them with liquidity for their shares and increasing their equity value at the same time is the right move for Ionic as a company.”

Penver denied the allegations of misconduct, calling the rumors on social media “baseless.” He also said Cagney’s characterization of the liquidity delay provision was inaccurate, depending on whether Ionic determined it was “unlikely.” [that] “The company could become a public company in a manner that meets the MSA requirements” by June.

Penver also said the company would have had to pay Hut 8 at least $20 million in termination fees if it decided to end the deal. He added that the deal contained other provisions that could net Hut 8 an additional $55 million in termination fees if the company filed for an IPO after it was terminated.

Hut8 declined to comment when contacted by Decrypt.

Mike Abatte, Chief Information Officer of Figure Markets, said: Decrypt He was heavily involved in mobilizing Ionic’s 86,000 shareholders. His knowledge of the Celsius bankruptcy comes from his previous experience as managing partner of NovaWulf Digital Management.

The investment firm, which has since been closed, was initially chosen as the company that would manage the distribution of Celsius’ assets and the company that became Ionic. Ultimately, a consortium of crypto companies called Fahrenheit won the tender to acquire Celsius’ assets.

When Fahrenheit’s plan failed, Celsius’s official committee of unsecured creditors decided to float the mining company itself, Cagney said. With two board members and a CEO leaving, shareholders are unhappy, Cagney said.

In the cease and desist letter, Abatte said the company wants a list of all Ionic shareholders. In addition, Figure disputes the claim that Ionic’s bylaws can restrict trading in Ionic’s stock under federal securities laws, he said.

At its peak, Celsius was a dominant crypto brand, claiming to have an $8 billion loan portfolio and $25 billion in assets under management. But the company went bankrupt when the cryptocurrency market faltered in 2022, eventually leading to fraud charges filed against former Celsius CEO Alex Mashinsky.

Former Celsius client Tony Vejseli recalls Mashinsky’s description of the company as “safer than a bank.” Vejseli, who said he lost two Bitcoins (worth about $112,000 today) in the lender’s collapse, is now working with Cagney to rally Ionic shareholders to meet with the company’s board.

From his perspective, Ionic’s fleet of miners is obsolete. And the company faces increasingly tough competition as miner revenues increase. languish From the start, he thought Ionic’s IPO plans were overly optimistic in such a challenging environment.

“This company should never have existed,” he said. “To say that shareholders don’t have confidence in it would be the understatement of the century.”

Edited by Andrew Hayward

Editor’s Note: This article was updated after publication to include comments from Ionic Digital and to note that Hut 8 declined to comment.