Marathon Digital Holdings has been fined $138 million for breaching a non-disclosure and non-circumvention agreement by using a proprietary growth strategy without compensating its developer, Michael Ho.
The Allegations
Marathon Digital Holdings, a major entity in the Bitcoin mining sector, has been hit with a substantial $138 million fine. This decision came after a unanimous jury verdict found the company guilty of breaching a non-disclosure and non-circumvention agreement.
Michael Ho, co-founder of US Bitcoin Corp and chief strategy officer at Hut 8, accused Marathon Digital of using a proprietary growth strategy he developed in 2020 without compensating him. This strategy focused on establishing a large-scale Bitcoin mining facility in North America.
According to court documents, Ho had entered into an agreement with Marathon in 2020 to provide proprietary information about a significant energy supplier for Marathon’s mining operations. The agreement explicitly stated that Marathon would not bypass Ho by engaging directly with the supplier without proper compensation.
The Court’s Decision
The lawsuit highlighted that Marathon had executed the strategy developed by Ho without offering him any remuneration for his proprietary information.
David Affeld of Affeld England & Johnson LLP and Gregg Zucker of Foundation Law Group LLP represented Ho in the case. They stressed the importance of honoring contractual commitments.
Affeld remarked,
“The unanimous jury verdict for $138 million vindicates Michael Ho’s efforts and expertise, and it reinforces the importance of honoring contractual obligations and respecting professional relationships.”
The verdict not only acknowledges Ho’s expertise but also highlights the necessity of ethical practices in the business community.
Marathon’s Current Standing
Despite the hefty financial penalty, Marathon Digital continues to be a significant player in the Bitcoin mining industry. The company, with a market capitalization of $6.77 billion, has recently doubled its operational hash rate to 26.3 exahashes per second and captured 158 blocks in June alone.
Wall Street investors seemed relatively unfazed by the fine, as Marathon’s shares (NASDAQ: MARA) fell by 3% during Monday’s trading session to just under $24, remaining close to four-month highs. However, they experienced an additional 2% drop in pre-market trading on Tuesday, testing the level of $23.46.
Future Prospects
In addition to dealing with the fine, Marathon is also exploring innovative projects. The company launched a 2-megawatt pilot project in Finland’s Satakunta region. This project aims to repurpose the heat generated from digital asset computing to provide warmth to the local community, showcasing Marathon’s ongoing commitment to both innovation and expansion.
Marathon Digital’s recent legal setback highlights the critical importance of upholding contractual obligations and maintaining ethical business practices, even as the company continues to make strides in the Bitcoin mining industry.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
