MGT Capital Investments, Inc.
- Company Name
- MGT Capital Investments, Inc.
- Stock Symbol
- Class Period
- October 9, 2015 to September 7, 2018
- Motion Deadline
- November 27, 2018
- District of New Jersey
The complaint charges MGT Capital and certain of its officers, directors and shareholders with violations of the Securities Exchange Act of 1934. Before the Class Period, MGT Capital described itself as “engaged in the business of acquiring, developing and monetizing assets in the online and mobile gaming space as well as the social casino industry.” In May 2016, MGT Capital announced it was transforming itself into a cybersecurity company, and currently purports to be engaged in bitcoin mining, with operations in the State of Washington and Sweden.
The complaint alleges that, starting in 2015, Barry Honig (“Honig”), an MGT Capital shareholder, and his associates chose MGT Capital to effectuate a pump-and-dump scheme whereby they bought cheap shares of the Company, obtained control over the Company and its management, exercised that control in order to cause the Company to engage in a misleading stock promotion that drove up the stock price and the trading volume of the Company’s shares, and finally, dumped their shares for a profit in the inflated market. Moreover, throughout the Class Period, Honig and his associates hid their control over the Company and took numerous steps to conceal their involvement in order to perpetuate the false appearance that the Company was independent and controlled by its CEO, John McAfee. As a result of defendants’ involvement in and concealment of the pump-and-dump scheme to inflate the price of MGT Capital securities, the securities traded at artificially inflated prices during the Class Period, with the Company’s stock price reaching a high of around $7 per share.
Then, through a series of partial disclosures beginning in September 2016, the Company revealed that it was under investigation by the SEC. On September 19, 2016, MGT Capital revealed it had received a subpoena from the SEC requesting “certain information from the Company.” On October 19, 2016, the Company announced that the NYSE had “determined to commence proceedings to delist the common stock of MGT Capital . . . from the Exchange.” In response, the Company issued a press release stating that it knew of “no facts or circumstances that would lead the NYSE . . . to reach its unilateral decision.” Finally, on September 7, 2018, the SEC announced it had “charged a group of 10 individuals and 10 associated entities for their participation in long-running fraudulent schemes that generated over $27 million from unlawful stock sales and caused significant harm to retail investors who were left holding virtually worthless stock.” According to the SEC, “a group of . . . microcap fraudsters led by Barry Honig manipulated the share price of the stock of three companies in classic pump-and-dump schemes. . . . ‘Honig and his associates engaged in brazen market manipulation that advanced their financial interest while fleecing innocent investors and undermining the integrity of our securities markets.’” On this news, the price of the Company’s stock plummeted to $0.395 per share on September 10, 2018, over 94% below the stock’s Class Period high.