Bitcoin miner Iris Energy is under scrutiny as a class-action lawsuit alleging Australian the Bitcoin mining company overstated its computing capabilities and misled investors about its prospects in high-performance computing (HPC).
The lawsuit, filed in the Eastern District of New York on October 7, seeks to represent shareholders who purchased IREN securities between June 20, 2023, and July 11, 2024.
Led by investor Paul Williams-Israel, the lawsuit claims that IREN misrepresented its ability to transition from Bitcoin mining to HPC, specifically alleging that the company's data centers were inadequate for such operations.
It alleges that the miner's Childress, Texas site lacked the necessary infrastructure for HPC, including backup power supplies and proper cooling systems, and that the company misled investors by promoting the facility as HPC-ready. The suit alleges that Iris Energy made “materially false and misleading,” adding that the company “knew or should have known that its Childress County, Texas site would be inadequate for use in the data center business, and that the Company's proprietary design was unlikely to work at the Childress site.”
Iris Energy did not immediately respond to a request for comment from Decrypt.
The lawsuit claims the facility had only a single power transmission line, with no backup power supply, making it unreliable for the continuous, high-stakes operations required in HPC environments.
The complaint names Iris Energy's co-founders, Daniel and William Roberts, and chief financial officer Belinda Nucifora as defendants.
The lawsuit comes at a time when Iris Energy has been pushing for recognition in both Bitcoin mining and HPC. A Bernstein report from July noted IREN as one of the top Bitcoin mining companies with potential upside, citing its power strategy and operational efficiency as key strengths.
The plaintiffs also point out that the company's spending on infrastructure was far below what is required for genuine HPC capabilities. Expert analysis from Culper Research, cited in the lawsuit, reveals that Iris Energy spent less than $1 million per megawatt to build its data centers.
This is drastically lower than the $10-20 million per megawatt that industry experts estimate is needed for HPC-ready facilities, which calls into question the company's ability to compete in the high-performance computing market.
In addition to infrastructure concerns, the lawsuit points to insider activity as a major red flag. Both Daniel and William Roberts began selling off their shares in early 2024, not long before the company publicly announced its pivot to HPC.
According to the lawsuit, these stock sales suggest that the co-founders were aware that the company's statements about its HPC capabilities were overstated and sought to protect their personal investments before the truth was revealed.
The suit seeks damages for investors who were affected by these alleged violations of federal securities laws.
Iris Energy has not yet commented on the lawsuit, which is expected to move forward in the coming months.
Edited by Stacy Elliott.