• Northern Data projected out-sized returns which were far away from reality.
• Following the news of a criminal investigation, Northern Data’s share price shortly tanked 40 percent.

Frankfurt-listed Bitcoin miner Northern Data is facing a fresh set of troubles as of now. The company has attracted scrutiny from Germany’s top financial regulator BaFin after it posted its unaudited financial results for 2020, giving a far below performance than expected. The German regulator has now filed a criminal complaint against top executives of Northern Data.

Previously, the company said that it is expecting an operating profit of €45-€60 million ($52-$70m) and revenues of €120m-€140m ($140-$162m). However, Northern Data then delayed its results for several months. Later, the company reported an operating loss of €12.3m ($14.2m) and revenue of €16.4m ($19m).

In a word with the Financial Times, BaFin said that it has flagged Northern data for potential market manipulation. However, it hasn’t disclosed any further details or specifics about the same.

The publication further notes that back in 2019, Northern Data was particularly interested and involved with the acquisition of U.S. crypto miner Whinstone. Back then, the company noted that “by far the largest Bitcoin mining facility worldwide with a capacity of one gigawatt on an area of over 100 acres in Texas”.

However, Riot Blockchain ended up acquiring Whinstone earlier this year in April 2021 for €550m ($640m). In the meanwhile, Norther Data also made a few important acquisitions. The company acquired Hydro66’s Node Pole data center in Northern Sweden. It also acquired Block.One’s GPU farm Decentric.

Northern Data stock tanks 40%

Last Friday, October 1, soon after the news of the criminal investigation, shares of Northern Data (ETR: NB2) tanked 40 percent in moments. From 76.30 EUR, the stock price collapsed all the way to 46 EUR. However, it has recovered nearly 30 percent from this low and is currently trading at 60 EUR. 

Northern Data clarified that the complaint from BaFin focuses majorly on a potential misleading ad hoc release published by the company back in 2019. Furthermore, Northern Data has blamed the wide gap between revenue expectations and reality on being “unable to realize the revenues with our two major customers” as those contracts “haven‘t led to the essential revenue recognition in FY 2020.”

Last year itself, Northern Data rebranded itself from Northern Bitcoin while claiming that it was focusing on HPC and AI workloads. However, it has been dogged by rumors that it is still a cryptocurrency business, making money through Bitcoin price volatility.

The recent episode about Northern Data has a strong message from the regulators. Claims with out-sized potential returns that don’t meet the reality will face strict regulatory action.