A group of investors filed a lawsuit against the Chinese mining equipment manufacturer Canaan. Investors accused the company of using dubious practices during the IPO.

Rosen Law Firm filed a lawsuit on behalf of a group of investors accusing Canaan, a Chinese mining equipment manufacturer, of making false and misleading statements during its initial public offering (IPO).

According to the lawsuit, Canaan did not disclose essential information, namely, it did not inform its investors that the strategic partnership with Grandshores, whose shares are traded on the Hong Kong Exchange (HKE), was in fact cooperation with a related party. Canaan also did not provide investors with correct information about its financial situation, which, in their opinion, was in worse condition than the company claimed.

“The company had recently removed numerous distributors from its website just prior to the IPO, many of which were small or suspicious businesses; and (4) several of the Company’s largest Chinese clients in prior years were clients who were not in the Bitcoin mining industry and, thus, would likely not be repeat customers.”

Investors demand compensation for the damage they have suffered as a result of Canaan’s actions.

In addition, The Schall Law Firm initiated an investigation into the case of a possible violation of US securities laws by Canaan. The firm said it is acting on behalf of Canaan investors.

Earlier, Marcus Aurelius Value published an analysis, noting that the Chinese manufacturer of ASIC miners provided investors with false forecasts regarding the company's potential earnings in 2020 and that at least one of the major buyers that Canaan talked about is an affiliate structure that it is unlikely to be able to fulfill a contract for the purchase of mining equipment worth $150 million.

Canaan held an IPO in late November and raised $90 million, which is 75% less than originally planned $400 million. The week before the IPO, Canaan had lost the support of its largest banking partner, Credit Suisse. Canaan shares are now traded on Nasdaq.