Marathon Digital Fined $138M for Breaching Non-Circumvention Agreement

Key Takeaways:

• Marathon Digital has been ordered to pay $138 million for breaching a non-circumvention agreement.
• Michael Ho, US Bitcoin Corp co-founder, won the case against Marathon Digital.
• Marathon Digital executed Ho's growth strategy without permission or fair compensation.

Marathon Digital's $138 Million Legal Defeat 

Law firm Affeld England & Johnson issued a press release last week, announcing a major win for Michael Ho. 

Ho, co-founder of US Bitcoin Corp, had sued Marathon Digital Holdings for breach of contract. He currently serves as chief strategy officer at Hut 8, a rival mining company. The jury delivered a unanimous verdict, ruling in favor of Ho and against Marathon Digital.

🚨JUST IN: A federal court jury *unanimously* ruled in favor of Michael Ho against $MARA @MarathonDH for $138M after finding that MARA breached a non-disclosure/non-circumvention agreement.

Not good. If you cut corners you end up getting cut yourself.https://t.co/v1S2YoXbpp

— RexFinance (@Rex_Finance) July 20, 2024

The case borders on a growth strategy Ho developed for Marathon in 2020, which included plans for a large-scale Bitcoin mining facility in North America. 

Marathon allegedly executed this strategy without compensating Ho for the proprietary information he provided, violating their non-circumvention agreement.

Reacting to the verdict, David Affeld, a partner at Affeld England & Johnson, said,

“The unanimous jury verdict for $138 million vindicates Michael Ho's efforts and expertise, and it reinforces the importance of honoring contractual obligations and respecting professional relationships.”

This legal setback comes as the company faces community complaints about noise pollution from its mining operations in Texas. 

In a related development, a Texas jury recently acquitted David Fischer, plant manager of Marathon's Granbury mining site, of 12 noise violations. 

Despite the acquittal, concerns persist. Over 40 residents in the Granbury area reported adverse medical conditions, which they attribute to the noise from Marathon's site, as detailed in a Time report.

"We're living in a nightmare": After the arrival of a massive Bitcoin mining facility, residents of Granbury, Texas are experiencing intense migraines, vertigo and heart conditions. One mom says her 8-year-old has lost hearing and has fluid leaking from her ears. pic.twitter.com/BVMCs0BCwE

— Robert Downen (@RobertDownen_) July 9, 2024

According to the report, law enforcement in Hood County recorded excessive noise levels at the site. The site exceeded 85 decibels on multiple occasions. This level of noise can lead to hearing loss with prolonged exposure, according to the US National Institute on Deafness and Other Communication Disorders.

Market Reaction and Growing Trend of the Bitcoin Mining Industry

Despite the recent legal setback and ongoing community challenges, Marathon Digital Holdings continues to maintain its position as the world's largest Bitcoin mining firm by market capitalization. 

Per the latest data, the company is valued at $6.12 billion, which places it ahead of its closest rival, CleanSpark, which has a market capitalization of $3.97 billion.

Major crypto mining stocks are surging! Marathon Digital (MARA) saw its market cap jump 37% in five days, from $5.51B to $7.56B. Even with a slight pullback, it holds a 27% gain over 11 days. #CryptoMining #MARA #StockMarket #Crypto pic.twitter.com/ne9C1Aday7

— 1ATH.Studio (@1ATHStudio) July 24, 2024

However, during Monday's trading session, Marathon's shares (NASDAQ: MARA) experienced a modest decline of 3%, settling just below $24.

MARA is down 2.3% since trading began today/ Source: Google Finance

This price point remains in proximity to the stock's four-month highs. However, the pre-market trading yesterday showed signs of additional downward pressure, with shares dipping by another 3% to test the $21.89 level. 

This subtle shift might indicate that some investors are beginning to factor in the potential long-term implications of the legal verdict.