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Item 3. Legal Proceedings

2022-03-10 compared with 2021-03-16 · 59 added, 154 removed, 6 unchanged (97% of the section changed)

LEGAL PROCEEDINGS

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;

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

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.

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.

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.

On February 15, 2019,

Feinberg, in his individual capacity and purportedly as trustee of the Jeffrey L.

Feinberg Personal Trust, and Terrence K.

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

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.

are now awaiting oral argument on the appeal.

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.

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.

part of the cancellation of certain indebtedness owed to Fortress Investment Group, LLC, we transferred ownership of various patents,

including U.S.

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.

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.

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;

January 14, 2021, Plaintiff Michael Ho (“Plaintiff” or “Ho”) filed a Civil Complaint for Damages and Restitution

(“Complaint”) against Marathon Patent Group, Inc., now known as Marathon Digital Holdings, Inc.

(the “Company”)

in the Superior Court of the State of California for the County of Riverside.

The Complaint alleges six causes of action against the

Company, (1) Breach of Written Contract;

(2) Breach of Implied Contract;

(3) Quasi-Contract;

2 unchanged sentences

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.

and (6) Negligent Interference with Prospective Economic Relations.

The Complaint seeks damages,

restitution, punitive damages, and costs of suit.

The claims arise from the same set of facts.

Ho alleges that the Company profited from

commercially-sensitive information he shared with the Company, purportedly under a mutual non-disclosure agreement, and that the Company

failed to compensate him for his role in securing the acquisition of a supplier of energy for the Company.

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 action to the United States District Court in the Central District of California, where the action

remains pending.

Marathon filed a motion for summary judgment/adjudication of all causes of action.

On February 11, 2022, the Court

granted the motion and dismissed Ho’s 2 nd , 5 th and 6 th causes of action.

Discovery is closed.

The Court held a pre-trial conference on February 24, 2022, where it vacated the March 3, 2022 trial date and ordered the parties to

meet and confer on a new trial date, which will likely be after June 2022, given the Court’s current backlog as a result of Covid.

The Court discussed the various theories of damages maintained by the parties.

In its ruling on the summary judgment motion and

at the pre-trial conference on February 24, 2022, the Court noted that a jury is more likely to accept $150,000 as an appropriate damages

amount if liability is found, as opposed to the various theories espoused by Ho that result in multi-million dollar recoveries.

Due to outstanding issues of fact and law, it is impossible to predict the outcome at this time;

however, after consulting legal counsel,

the Company is confident that it will prevail in this litigation, since it did not have a contract with Mr.

Ho and he did not disclose

any commercially-sensitive information under any mutual nondisclosure agreement that was used to structure any joint venture with energy

Trial is set to begin on May 26, 2022.

the quarter ended September 30, 2021, the Company and certain of its executives received a subpoena to produce documents and communications

concerning the Hardin, Montana data center facility described in our Form 8-K dated October 13, 2020.

On October 6, 2020, the Company

entered into a series of agreements with multiple parties to design and build a data center for up to 100-megawatts in Hardin, MT.

conjunction therewith, the Company filed a Current Report on Form 8-K on October 13, 2020.

The 8-K discloses that, pursuant to a Data

Facility Services Agreement, the Company issued 6,000,000 shares of restricted Common Stock, in transactions exempt from registration

under Section 4(a)(2) of the Securities Act of 1933, as amended.

We understand that the SEC may be investigating whether or not there

may have been any violations of the federal securities law.

We are cooperating with the SEC.

December 17, 2021, a putative class action complaint was filed in the United States District Court for the District Court of Nevada,

against the company and present and former senior management.

The Complaint alleges securities fraud related to the disclosures of an

SEC investigation previously made by the Company on November 15, 2021.

Plaintiff Tad Schaltre served the Complaint on the Company

on March 1, 2022.

February 18, 2022, a shareholder derivative complaint was filed in the United States District Court for the District of Nevada, against

current and former members of the Company’s board of directors and senior management.

The complaint is based on allegations substantially

similar to the allegations in the December 17, 2021 putative securities class action complaint, related to the Company’s disclosure

of an SEC investigation previously made by the Company on November 15, 2021.

On March 4, 2022, the Complaint was served on the Company.

MINE SAFETY DISCLOSURES.

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-K

Item 3. Legal Proceedings