MARA Holdings, Inc. 10-K

ITEM 3. LEGAL PROCEEDINGS Feinberg Litigation Jeffrey Feinberg v. Marathon Patent Group, Inc., Doug Croxall, and Francis Knuettel II, Superior Court of the State of California, County of Los Angeles, Case Number BC673128; Date Filed: August 21, 2017 On August 21, 2017, plaintiff Jeffrey Feinberg filed his Complaint against the Company and its Chief Executive Officer and Chief Financial Officer, purporting to state claims under Sections 11, 12(a)(2) and 15 of the federal Securities Act of 1933, and to state common law claims for “actual fraud and fraudulent concealment,” constructive fraud, and negligent misrepresentation. Feinberg sought unspecified money damages, as well as costs and attorneys’ fees, and equitable or injunctive relief, all based on allegations that he purchased Company securities and was induced to continue holding shares of the Company’s common stock through his reliance on a series of purported misstatements and omissions concerning the Company’s financial performance and future prospects. On October 10, 2017, all defendants filed a motion to dismiss or to stay the action, contending that Feinberg’s claims were encompassed by various written contracts in which he had agreed that any disputes he had with the Company should be litigated exclusively in the courts in New York City. While that motion was pending, on November 14, 2017, Feinberg voluntarily dismissed his complaint, in its entirety, without prejudice. On March 27, 2018, Feinberg, purportedly joined by the Jeffrey L. Feinberg Personal Trust and the Jeffrey L. Feinberg Family Trust, refiled the alleged claims described above in a lawsuit filed in the Supreme Court of the State of New York, County of New York. The new lawsuit is entitled Jeffrey Feinberg, Jeffrey L. Feinberg Personal Trust, and Jeffrey L. Feinberg Family Trust v. Marathon Patent Group, Inc., Doug Croxall, and Francis Knuettel II , Index No. 651463/2018 (the “NY Action”). The plaintiffs purported to state claims under Sections 11, 12(a)(2) and 15 of the federal Securities Act of 1933, and to state common law claims for “actual fraud and fraudulent concealment,” constructive fraud, and negligent misrepresentation. The plaintiffs sought unspecified money damages (including punitive damages), as well as costs and attorneys’ fees, and equitable or injunctive relief, all based on allegations that over a period extending from approximately May 2015 through May 2017 they purchased Company securities and were induced to continue holding shares of the Company’s stock through their reliance on a series of purported misstatements and omissions concerning the Company’s financial performance and future prospects. On June 15, 2018, all defendants filed a motion to dismiss the complaint in the NY Action asserting, among other arguments, that the Jeffrey L. Feinberg Personal Trust and the Jeffrey L. Feinberg Family Trust lack capacity to sue, that the purported state law “holder” claims are barred as a matter of law, and that plaintiffs otherwise failed to state facts sufficient to state a claim. Plaintiffs opposed the motion. After the motion was fully briefed, the court conducted an oral argument on January 16, 2019. At the conclusion of the argument, the court granted the motion to dismiss, allowing plaintiff Feinberg 30 days’ time to replead. In addition, concurrent with filing their motion to dismiss, the defendants filed a motion to stay discovery pursuant to the mandatory stay provisions of the Private Securities Litigation Reform Act of 1995 and local state rules. The plaintiffs filed a statement of non-opposition to the motion to stay discovery, and on January 9, 2019, the court granted that motion. 30 On February 15, 2019, Feinberg, in his individual capacity and purportedly as trustee of the Jeffrey L. Feinberg Personal Trust, and Terrence K. Ankner, purportedly as trustee of the Jeffrey L. Feinberg Family Trust, filed what they styled as an “Amended Complaint.” These plaintiffs purport to state claims against the Company, Doug Croxall and Francis Knuettel II under Sections 11, 12(a)(2) and 15 of the federal Securities Act of 1933, and to state common law claims for “actual fraud and fraudulent concealment,” constructive fraud, and negligent misrepresentation. In the Amended Complaint, the plaintiffs seek unspecified money damages (including punitive damages), as well as costs and attorneys’ fees, and equitable or injunctive relief, all based on allegations that over a period extending from approximately May 2015 through May 2017 they purchased Company securities and were induced to continue holding shares of the Company’s stock through their reliance on a series of purported misstatements and omissions concerning the Company’s financial performance and future prospects. On March 7, 2019, defendants Marathon Patent Group, Inc. and Doug Croxall filed a motion to dismiss the Amended Complaint, and on March 22, 2019, defendant Francis Knuettel II filed a motion to dismiss the Amended Complaint. On April 5, 2019, plaintiffs filed an opposition to defendants’ motions to dismiss, and on April 17, 2019 defendants filed reply papers in support of the motions to dismiss. On July 9, 2019, the court heard the parties’ oral arguments and, at the conclusion of those arguments, took the motions to dismiss under submission. On March 13, 2020, the court issued its Decision in which it granted the motions to dismiss in full and ordered that the case be dismissed with prejudice. On or about May 4, 2020, the plaintiffs filed a notice of appeal. Plaintiffs filed their opening appellate brief on January 4, 2021, and defendants filed their responsive appellate briefs on February 3, 2021. The parties are now awaiting oral argument on the appeal. Ramirez Litigation On July 20, 2018, Tony Ramirez filed a complaint against the Company and certain of its former directors. The complaint was filed in the United States District Court for the Central District of California. Mr. Ramirez alleged that he was a shareholder of the Company and purported to assert a single claim under Section 14(a) of the Securities and Exchange Act of 1934 and SEC Rule 14a-9 promulgated thereunder. The parties entered into a “Settlement Agreement and Mutual Release” and the case was voluntarily dismissed with prejudice on December 17, 2018. Amazon Litigation As part of the cancellation of certain indebtedness owed to Fortress Investment Group, LLC, we transferred ownership of various patents, including U.S. Patent No. 7,177,798, commonly referred to as “Patent 798.” Fortress created a new Special Purpose Entity, CF Dynamic Advances LLC, in which we own a 30% interest. In May 2018, Rensselaer Polytechnic Institute and CF Dynamic Advances LLC filed a complaint against Amazon.com, Inc. in the United States District Court for the Northern District of New York, which alleges, among other things, that “Alexa Voice Software and Alexa enabled devices” infringe U.S. Patent No. 7,177,798, entitled “Natural Language Interface Using Constrained Intermediate Dictionary of Results.” The complaint seeks an injunction, monetary damages, an ongoing royalty, pre- and post-judgment interest, attorneys’ fees, and costs. If plaintiffs are successful, and if the recoveries or settlement proceeds are sufficient following litigation expenses and recovery of amounts due in connection with the cancelled loan, the special purpose entity could be entitled to a portion of the net proceeds. There can be no assurance that the plaintiff will be successful or that any recoveries will exceed amounts due under the debt settlement arrangements or that our 30% interest in the special purpose entity will have any value even if the plaintiffs are successful in their case against Amazon. Michael Ho, an individual v. Marathon Patent Group, Inc., a Nevada Corporation, Case No. 5:21-cv-00339-PSG-SPx (C.D. Cal.) On January 14, 2021, Plaintiff Michael Ho (“Plaintiff” or “Ho”) filed a Civil Complaint for Damages and Restitution (“Complaint”) against the Company and 10 Doe Defendants. The Complaint alleges six causes of action against the Company, (1) Breach of Written Contract; (2) Brach of Implied Contract; (3) Quasi-Contract; (4) Services Rendered; (5) Intentional Interference with Prospective Economic Relations; and (6) Negligent Interference with Prospective Economic Relations, which interestingly is the one plead against “all Defendants” and is most likely to involve later named defendants. The claims arise from the same set of facts, Ho alleges that the Company profited from commercially sensitive information he shared with the Company and then it refused to compensate him for his role in securing the acquisition of Beowulf. In connection with his Complaint, Plaintiff alleges that in early 2020, he obtained information that an electricity producer, Beowulf Energy, had available, unused capacity and that he obtained pricing information and approached Mr. Okamoto “concerning a proposed transaction that would be favorable to MARA.” Plaintiff specifically alleges to have been damaged in an amount in excess of $30,000,000 (and pleads such damages for each cause of action) and costs of suit. In addition, if successful, Plaintiff would be able to claim attorney’s fees as a prevailing party. Defendant denies liability. The Company denies breaching the NDA with Mr. Ho and further alleges that the agreement reached with Beowulf Energy was a result of an independent commercial relationship. b) the progress of the case to date. On February 22, 2021, the Company responded to Mr. Ho’s Complaint with a general denial and the assertion of applicable affirmative defenses. Then, on February 25, 2021, the Company removed the matter to federal court. The court has not set an initial scheduling conference yet so there are no significant litigation deadlines at this point in time. The Company is in the process of early facts investigation and discussions with Mr. Ho’s legal counsel about case scheduling, including a discovery plan. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 31 PART II