This article is from:The Block, by Yogita Khatri, Frank Chaparro
Odaily Translator |
Odaily Translator |
Layer1, a North American cryptocurrency mining company backed by PaypaL co-founder and well-known venture investor Peter Thiel, allegedly misled investors about its founding team in its financing materials. If the fraud is true, it may bring serious legal consequences to the company.
Layer1 noted in its 2019 business plan that former Canaan co-founder Xiangfu Liu was a “founding member” of the company. However, Liu Xiangfu himself denied the news, and explained that he and the Layer1 team were just friends and did not participate in the companys business.
Liu Xiangfu said: I have no (contractual) relationship with Layer1. I have never joined this company.
Layer1 also confirmed this. Alexander Liegl, CEO of the company, said: There are some misunderstandings about the relationship between Liu Xiangfu and Layer1. Liu Xiangfu has always been a good friend of mine and has supported Layer1 from the beginning. Anyone who does business with us, seeing Liu Xiangfus name Its not surprising that its tied to Layer1.
In October last year, several media reported that Layer1 had completed a new round of financing of US$50 million through Peter Thiel and other investors. The truth is, however, that Layer1 was still trying to close the round until January of this year. If any investor relied on misleading promotional material to make a decision, it could be grounds for a lawsuit by the investor, two legal sources said, because the Securities Act of 1933 prohibits false claims in securities sales. statement.
David Silver, founding partner of cryptocurrency-focused law firm Silver Miller, said: Distortion of facts is falsehood. If investors suffer loss of interest as a result of false statements, they may sue for it.
The situation is similar to that of NextBlock Global, a Canadian cryptocurrency investment firm. In May 2019, the US Securities and Exchange Commission (SEC) issued a warning to the company and fined its CEO Alex Tapscott $25,000. The U.S. SEC said that in addition to selling unregistered securities, NextBlock also falsely advertised to investors, saying that several blockchain industry celebrities were advisors to the project.
It turns out that Layer1’s $50 million round of financing was also inaccurate. According to an SEC filing in October 2019, Layer1 had only raised $23.6 million of its $50 million funding goal at the time.
BnkToTheFuture data shows that as of January 2020, Layer1 has raised a total of US$41.39 million through Series A financing. Previously, the company also completed a $2.1 million seed round of financing in December 2018. Alexander himself confirmed this data.
“Layer1 has never officially announced any funding, but we’ve realized that there has been some misunderstanding about how much we’ve raised,” Alexander said.
Alexander, meanwhile, declined to comment on why the company hadnt corrected the misunderstanding."
Layer1 is currently seeking to raise an additional $50 million in secured debt. Alexander said: Our boxes are deployed and we are currently seeking debt financing to scale the business without diluting equity.
Layer1s ambition is to help the United States control most of the computing power of the Bitcoin network. Currently, Bitcoins computing power is dominated by China, accounting for as much as 65%.
The company already operates a mining center in Texas, USA, and uses proprietary refrigeration technology to design and manufacture mining equipment. Recently, in a private conversation with investment platform BnkToTheFuture, Alexander said the Texas mining hub is currently working to scale up operations to reach 150 megawatts of electricity consumption by the end of the year.
