Iris Energy Limited, the publicly-listed Wall Street Bitcoin (BTC) mining company (NASDAQ: IREN) that recently pivoted to promoting itself as a high-performance computing (HPC) data center operator, is facing a class action lawsuit alleging it misrepresented its capabilities and prospects to investors.

Wall Street Bitcoin Miner Faces Lawsuit over Alleged Misrepresentation of Data Center Capabilities

The lawsuit, filed in the United States District Court for the Eastern District of New York, claims that Iris Energy and its executives made false and misleading statements about the company's ability to transition its facilities from bitcoin mining to HPC and artificial intelligence applications.

According to the complaint, Iris Energy's Childress, Texas facility, which the company touted as a key asset for its HPC strategy, lacks critical features necessary for such operations. The lawsuit alleges that the site has inadequate power redundancy, cooling systems, and fiber connectivity.

The lawsuit also cites statements made by Iris Energy's co-CEO, Daniel Roberts, who claimed the company had "built this base layer, this bedrock of high-performance data centers that can do any high-performance compute." The plaintiffs argue that these statements were materially false and misleading, “because the Company overstated the capabilities of its data center business, and its overall prospects.”

Iris Energy's stock price fell approximately 15% following the publication of a critical report by Culper Research, which raised concerns about the company's HPC claims and the suitability of its facilities for such applications.

“Culper further stated that it was ‘short IREN because we believe the Company has dramatically misrepresented the strength and potential of its assets for HPC/AI Applications’,” the lawsuit commented.

The class action seeks to recover damages on behalf of investors who purchased Iris Energy securities between June 20, 2023, and July 11, 2024, alleging violations of federal securities laws.

Bitcoin Miners from Wall Street Pivot to AI

IREN's shift towards AI is driven by increasingly challenging conditions in the cryptocurrency mining market. The company's latest fiscal year 2024 report revealed that by adding AI industry support services to its offerings, IREN managed to secure new revenue streams. Although the net loss still amounted to $29 million, it was six times smaller than the previous year.

Finance Magnates reported in 2023 that after a tough 2022, cryptocurrency miners began seriously looking towards AI and HPC, which are highly energy-intensive industries.

An August report from VanEck this year confirmed this trend. According to Matthew Sigel, VanEck's head of digital assets research, the pivot from BTC to HPC/AI could unlock $38 billion in value for mining companies by 2027.

"AI companies need energy, and bitcoin miners have it," Sigel commented. "As the market values the growing AI/HPC data center market, access to power—especially in the near term—is commanding a premium."

Examples of such moves have been visible since last year. For instance, HIVE Blockchain changed its name to HIVE Digital to better reflect the evolving nature of its business, which now focuses not only on BTC mining but also on supporting HPC and AI industries. The company expects this new venture to double its revenue and has announced the construction of a new hydroelectric data center to support this goal.