Mawson Infrastructure, a Bitcoin hosting and mining company, unexpectedly terminated CEO and President Rahul Mewawalla due to serious fraud and breach of fiduciary duty allegations.Â
According to a report by The Miner Mag, the company has also stripped Mewawalla of board membership and has filed a lawsuit in the Delaware Court of Chancery for damages.
Notably, from earlier this year, Mewawalla was praised for “high performance” and was rewarded with a $2.5 million cash bonus, 1.2 million restricted stock units, and a salary increase to $1.2 million a year.
The company maintains that Mewawalla’s behavior violated his contractual and ethical obligations to the company and its stockholders.
Months of Tension and Internal Investigation End with Leadership Turmoil
The company’s working relationship with Mewawalla began to deteriorate at the end of May when he was informed his termination “for Cause” was under consideration.
He was placed on administrative leave shortly thereafter, and General Counsel Kaliste Saloom assumed the role of interim CEO.
The board made its decision on July 8 to complete the termination and suspended his board privileges outright.
Mawson’s lawsuit claims Mewawalla acted against the best interests of the company, though specifics of the alleged fraudulent transactions have not been disclosed.
Despite the claims, Mewawalla has denied any malfeasance and maintains that his stewardship led to the company’s exponential growth during his tenure.
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Mewawalla Defends Record, Citing Financial Growth and Strategic Milestones
In his July 17 letter to the board, Mewawalla vehemently denied the accusations.
He reminded the board that while in office, Mawson’s revenues grew by 36%, gross profit increased by 35%, and significant operating efficiencies were achieved, including reductions in SG&A expenses.
He reminded the board of its own earlier public support of his performance and that present accusations are contrary to the company’s earlier declarations.
Mewawalla has made no other public comments, but his letter suggests that he may sue or countersue in response to the suit filed against him.
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Legal Problems Intensify as Mawson Forms Feuds with External Partners
The leadership scandal comes as Mawson is already engaged in a high-profile court battle with NYDIG and its parent organization, Stone Ridge.
The lawsuit claims that Mawson unlawfully took custody of over 20,000 ASIC mining machines worth approximately $30 million in its Midland, Pennsylvania, warehouse.
The scandal has marred the company’s overall business activities, despite inking a massive colocation agreement with Canaan, a well-known manufacturer of mining equipment.
That sale involves 64 megawatts of capacity for more than 17,000 next-generation mining devices, significantly boosting Canaan’s hashrate capacity in North America.
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Broader Trend Unfolding of CEOs Being Held to Account in Crypto Space
Mawson’s CEO scandal follows a string of high-profile executive scandals that have shaken the crypto and blockchain space.
Self Chain also fired its CEO, Ravindra Kumar, recently due to reasons that he was engaged in a $50 million OTC crypto Ponzi scheme.
Similarly, Genesis brought a $3.3 billion fraud action against Digital Currency Group and CEO Barry Silbert, alleging that they had misrepresented the company’s stability.
Even in the wider non-crypto universe, Cube Entertainment’s co-CEO is under investigation for allegedly scamming investors on a blockchain opportunity.
Together, these incidents demonstrate a rising surge of corporate responsibility and legal regulation in an industry still searching for its identity when it comes to regulation and investor trust.
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