Bitcoin Miner Northern Data Moves to Dismiss Ex-Employees’ Whistleblower Suit

European bitcoin mining firm Northern Data is fighting a whistleblower lawsuit filed by two former executives who claim they were unfairly dismissed after they raised concerns about the company’s finances and alleged tax evasion.

On Monday evening, Northern Data attorneys filed a motion to dismiss the federal lawsuit, calling it a “textbook example of bad faith litigation” and claiming that the two plaintiffs — Gulsen Kama and Joshua Porter — had “unproductive, short tenures at the company” and were subsequently terminated, with Kama for cause and Porter for “inefficiency.”

“When Porter and Kama made exorbitant ‘severance’ demands, Northern Data denied them,” Northern Data’s attorneys wrote in the dismissal request. “In response, both employees now call themselves ‘whistleblowers’ and stand to profit personally and financially from allegations they knew about and had every reason to know about.”

Monday’s filing also noted that Kama’s lawsuit against Northern Data isn’t the first rodeo lawsuit she’s filed against her former employers. In 2019, she filed a whistleblower lawsuit against tax preparer Jackson Hewitt, claiming she was wrongfully fired after she raised concerns that the company lied about her potential relocation to New Jersey to receive a $2.7 million tax break. Last year, Kama sued another employer, Quest Diagnostics, alleging workplace discrimination based on her gender and ethnicity. The results of those whistleblower lawsuits were not immediately clear.

A lawyer for Kama and Porter did not respond to CoinDesk’s request for comment.

Northern Data’s motion to dismiss is largely procedural in nature, arguing that the California court overseeing the case should dismiss the case for lack of jurisdiction over the corporate defendants (in this case, the U.S. subsidiaries of the German tech company) who are incorporated in Delaware and have their principal place of business in Virginia. The lawyers also argue that the allegations of fraud, which they describe as “inflammatory but completely unsupported,” lack sufficient detail.

The hearing to consider the motion to dismiss will be held on August 19, 2024 at 1:30 PM local time (20:30 UTC) in a Los Angeles courthouse.

Explosive claims

Kama and Porter’s first amended complaint against their former employer included explosive allegations that Northern Data lied to investors about the strength of its finances, concealed the fact that it was “on the verge of bankruptcy” and also “knowingly evaded taxes potentially amounting to tens of millions of dollars.”

The story continues

The allegations come amid growing media speculation that the Tether-backed tech firm is considering a U.S. initial public offering (IPO) of its artificial intelligence unit, which Bloomberg reported is valued at $16 billion.

In their Monday filing, Northern Data lawyers declined to comment on market speculation but stressed that, if true, “the period leading up to an IPO is a particularly sensitive time for a company. As plaintiffs no doubt know, allegations of fraud – no matter how reckless – can undermine that process.”

Porter and Kama say the firm has a “$30 [million] German tax liability and additional liabilities of approximately $8 million [million] while having only $17 at the same time [million] cash on hand and a $3 monthly burn rate [million]-$4 [million]The lawsuit also alleges that the firm engaged in “rampant tax evasion” in its early years and had no plans to take corrective action to account for it, which could leave them liable for “tens of millions of dollars” in U.S. tax liabilities if audited.

Both Kama and Porter claimed they were fired after bringing their concerns to their superiors.

A spokesman for Northern Data said the company “denies the allegations in the strongest terms”.

“It is no coincidence that these allegations from disgruntled former employees have been made public just days after unsubstantiated media speculation that the company was considering a potential capital markets event and just before the publication of our 2023 accounts. The allegations are clearly financially motivated and completely without basis. We will vigorously counter these allegations to protect ourselves from false claims that harm our company and our business.”

The spokesperson added that the company is “well capitalized” and has a “very strong growth plan with revenue expected to more than triple by 2024.”