What changed in this filing

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Item 1. Legal Proceedings

2021-08-16 compared with 2021-05-06 · 78 added, 78 removed, 5 unchanged (97% of the section changed)

Legal Proceedings

We are subject to litigation, claims,

investigations and audits arising from time to time in the ordinary course of our business.

We are subject to litigation, claims, investigations

and audits arising from time to time in the ordinary course of our business.

CleanSpark, Inc.

Growth Fund, LLC

On August 5, 2020, the Company filed

a verified complaint (the “Complaint”) in the Supreme Court of the State of New York against an investor (“Investor”).

Among other things, the Complaint seeks:

declaratory relief against Investor in response to Investor’s claim that a Form

8-K filed by the Company in relation to a July 20, 2020 securities purchase agreement (the “July 2020 SPA”) needed

pre-approval by Investor prior to filing, and injunctive relief in response to conversion notices sent by Investor claiming trigger

events and defaults arising out of the failure to obtain the Form 8-K pre-approval.

The case was subsequently removed to the United

States District Court for the Southern District of New York, which then determined that the parties’ agreements required

a JAMS arbitrator sitting in the U.S.

Virgin Islands to resolve the parties’ dispute over which of their agreements’

competing forum selection clauses was controlling, and that therefore the Court’s personal jurisdiction over Investor had

not been established.

While the New York action was pending, Investor filed a demand for arbitration with JAMS in the U.S.

Islands, alleging breach of the Securities Purchase Agreement dated December 31, 2018, and the Purchase Agreement dated April 17,

2019 (the “Prior SPAs”) between Investor and the Company (the “Arbitration”) and seeking issuance of additional

shares of the Company.

The Company then filed a response to Investor’s claims, denying Investor’s claims and asserting

counterclaims against Investor, and also filed for emergency injunctive relief in the Arbitration seeking, among other things,

an order enjoining Investor from continuing to pursue certain remedies based on the allegations in the Arbitration between Investor

and the Company.

On September 21, 2020, the arbitrator granted the Company’s motion for emergency interim relief in the Arbitration.

On April 30, 2021, the Arbitrator granted

in part the Company’s motion for partial summary judgment and denied the Investor’s motion for partial summary judgment,

and ordered the following:

July 2020 SPA is a fully merged and integrated agreement and its publicity clause supersedes the publicity clauses of the Prior

SPAs between Company and Investor with respect to securities filings relating to the July 2020 SPA transaction;

Company had no obligation to allow the Investor to review and approve certain 8-K’s and 10-Q’s concerning the July

2020 SPA transaction and the purported failure to allow the Investor to review and approve such filings was not a breach of the

Prior SPAs between the Company and Investor;

Company’s obligations under the parties’ prior debenture and note (the “Debenture” and “Note”)

were discharged when the Investor fully converted those instruments on or before June 30, 2020;

subsequent delivery notices sent by the Investor were void ab initio and the Company no longer has any obligations under the Debenture

Investor’s claim for liquidated damages arising from the Company’s alleged failure to deliver conversion shares under

the Debenture and Note was denied on the grounds that (1) the Investor’s right to issue delivery notices had expired, and

the Company’s obligations under the Debenture and Note had been discharged prior to June 30, 2020, and (2) all the Investor’s

delivery notices rely at least in part on the Company’s alleged breach of the Prior SPAs’ publicity clause with respect

to securities filings relating to the July 2020 SPA transaction, a claim to which the Arbitrator ruled in the Company’s favor.

In so holding, the Arbitrator also

denied, as a matter of law, the Investor’s claims for breach of contract (Counts 1 and 2) and its claim seeking specific

performance of delivering additional shares (Count 4).

Certain claims remain for trial in

the Arbitration and the ultimate outcome of this matter cannot be determined with certainty.

As it has stated previously, the Company

believes that claims raised by the Investor in and related to the Arbitration are without merit, and the Company intends to continue

to both defend itself vigorously and to vigorously prosecute its counterclaims.

It is possible that actions related

to this dispute with the Investor may yet be filed in the same or other forums.

The Company does not intend to file further Current

Reports on Form 8-K describing the additional lawsuits, or provide updates, except as required by law.

Discover Growth

previously reported on Current Reports on Form 8-K filed by CleanSpark, Inc., a Nevada corporation (the “Company”), with

the Securities and Exchange Commission (the “SEC”) on August 11, 2020 and May 5, 2021, an Annual Report on Form 10-K filed

by the Company with the SEC on December 17, 2020, a Quarterly Report on Form 10-Q filed by the Company with the SEC on February 12, 2021

and elsewhere in certain SEC filings, the Company had been engaged in ongoing litigation with an investor (the “Investor”).

On June 14, 2021, the Company and Investor

entered into a mutual settlement agreement (the “Settlement Agreement”), pursuant to which the parties agreed, among other

things, (i) to settle and dismiss, with prejudice, all pending actions related to the parties’ dispute (collectively, the “Actions”);

(ii) to mutually release all claims, whether known or unknown, that either party may have now or in the future related thereto;

to terminate all of the agreements previously entered into by and between the parties, including all rights and obligations set forth

therein (collectively, the “Prior Agreements”), provided, however, that (a) any and all warrants previously issued to Investor

pursuant to the Securities Purchase Agreement dated December 31, 2018 and the Purchase Agreement dated April 17, 2019 (the “Prior

SPAs”) (collectively, the “Warrants”) shall remain in force and effect, and (b) within a commercially reasonable amount

of time after execution of the Settlement Agreement, Investor shall irrevocably assign the Warrants to an otherwise unaffiliated third

Each party agreed to bear its own fees and costs for the Actions.

The Settlement Agreement contains no admission or concession

of fault, or of the truth of or validity or sufficiency of any allegation, contention or claim of either the Company or the Investor.

CleanSpark, Inc.

On January 20, 2021, Scott Bishins

(“Bishins”), individually, and on behalf of all others similarly situated (together, the “Class”), filed

a class action complaint (the “Class Complaint”) in the United States District Court for the Southern District of New

York against the Company, its Chief Executive Officer, Zachary Bradford (“Bradford”), and its Chief Financial Officer,

Lori Love (“Love”) (the “Class Action”).

The Class Complaint alleges that, between December 31, 2020 and

January 14, 2021, the Company, Bradford, and Love “failed to disclose to investors:

(1) that the Company had overstated its

customer and contract figures;

(2) that several of the Company’s recent acquisitions involved undisclosed related party transactions;

and (3) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations,

and prospects were materially misleading and/or lacked a reasonable basis.” (the “Class Allegations”).

Complaint seeks:

(a) certification of the Class, (b) an award of compensatory damages to the Class, and (c) an award of reasonable

costs and expenses incurred by the Class in the litigation.

To date, no class has been certified in the Class Action.

the ultimate outcome of the Class Action cannot be determined with certainty, the Company stands behind all of its prior statements

and disclosures and believes that the claims raised in the Class Complaint are entirely without merit.

The Company intends to both

defend itself vigorously against these claims and to vigorously prosecute any counterclaims.

On January 20, 2021, Scott Bishins (“Bishins”),

individually, and on behalf of all others similarly situated (together, the “Class”), filed a class action complaint (the

“Class Complaint”) in the United States District Court for the Southern District of New York against the Company, its Chief

Executive Officer, Zachary Bradford (“Bradford”), and its Chief Financial Officer, Lori Love (“Love”) (the “Class

The Class Complaint alleges that, between December 31, 2020 and January 14, 2021, the Company, Bradford, and Love “failed

to disclose to investors:

(1) that the Company had overstated its customer and contract figures;

(2) that several of the Company’s

recent acquisitions involved undisclosed related party transactions;

and (3) that, as a result of the foregoing, Defendants’ positive

statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.”

(the “Class Allegations”).

The Class Complaint seeks:

(a) certification of the Class, (b) an award of compensatory damages

to the Class, and (c) an award of reasonable costs and expenses incurred by the Class in the litigation.

To date, no class has been certified

in the Class Action.

the ultimate outcome of the Class Action cannot be determined with certainty, the Company stands behind all of its prior statements and

disclosures and believes that the claims raised in the Class Complaint are entirely without merit.

The Company intends to both defend

itself vigorously against these claims and to vigorously prosecute any counterclaims.

Notwithstanding the Class Allegations’

lack of merit, however, the Class Action may distract the Company and cost the Company’s management time, effort and expense

to defend against the claims made in the Class Complaint.

lack of merit, however, the Class Action may distract the Company and cost the Company’s management time, effort and expense to

defend against the claims made in the Class Complaint.

Notwithstanding the Company’s belief that the Company and its management

have complied with all of their obligations under applicable securities regulations, no assurance can be given as to the outcome

of the Class Action, and in the event the Company does not prevail in such action, the Company, its business, financial condition

and results of operations would be materially and adversely affected.

have complied with all of their obligations under applicable securities regulations, no assurance can be given as to the outcome of the

Class Action, and in the event the Company does not prevail in such action, the Company, its business, financial condition and results

of operations would be materially and adversely affected.

Ciceri, derivatively on behalf of CleanSpark,

Bradford, Love, Schultz, Beynon, McNeill, and Wood ( consolidated with Perna, derivatively on behalf of CleanSpark, Inc.,

Bradford, Love, Schultz, Beynon, McNeill, and Wood)

On May 26, 2021, Andrea Ciceri (“Ciceri”),

derivatively on behalf of CleanSpark, Inc., filed a verified shareholder derivative action (the “Ciceri Derivative Action”)

in the United States District Court in the District of Nevada against Chief Executive Officer, Zachary Bradford (“Bradford”),

Chief Financial Officer, Lori Love (“Love”) and Directors Matthew Schultz, Roger Beynon, Larry McNeill and Tom Wood (Bradford,

Love and Directors collectively referred to as “Defendants.”) On June 22, 2021, Mark Perna (“Perna”) filed a verified

shareholder derivative action (the “Perna Derivative Action”) in the same Court against the same Defendants making substantially

similar allegations.

On June 29, 2021, the court consolidated the Ciceri Derivative Action with the Perna Derivative Action in accordance

with a stipulation among the parties (the consolidated case referred to as the ”Derivative Action”).

The Derivative Action

alleges that Defendants:

(1) made materially false and misleading public statements about the Company’s business and prospects;

(2) did not maintain adequate internal controls;

and (3) did not disclose several related party transactions benefitting insiders, questionable

uses of corporate assets, and excessive compensation.

The claims asserted against all Defendants include breach of fiduciary duties, unjust

enrichment, abuse of control, gross mismanagement, and waste of corporate assets.

A claim for contribution under Sections 10(b) and 21D

of the Securities and Exchange Act is asserted against only Bradford and Love.

The Derivative Action seeks declaratory relief, monetary

damages, and imposition of adequate corporate governance and internal controls.

the ultimate outcome of the Derivative Action cannot be determined with certainty, the Company stands behind all of its prior statements

and disclosures, and believes that the claims raised in that case are entirely without merit.

The Company intends to both defend itself

vigorously against these claims and to vigorously prosecute any counterclaims.

Notwithstanding the Derivative Action’s

lack of merit, however, it may distract the Company and cost the Company’s management time, effort and expense to defend against

Notwithstanding the Company’s belief that the Company and its management have complied with all of their obligations

under applicable securities regulations, no assurance can be given as to the outcome of the Derivative Action, and in the event the Company

does not prevail in such action, the Company, its business, financial condition and results of operations would be materially and adversely

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings