An AI-focused education company has revealed it needs to liquidate its Bitcoin assets following a U.S. court ruling that forbids it from selling shares, raising funds, or purchasing additional Bitcoin.
A U.S. District Court in the Southern District of New York issued a preliminary injunction on March 13, halting the company’s access to its $150 million in at-the-market funding and disrupting its Bitcoin-centric strategy.
Consequently, the organization has decreased its Bitcoin holdings from 440 to 430 BTC to support its operational needs, as indicated in a company announcement.
Ongoing Legal Issues
This legal situation arises from the company’s attempt to terminate an Asset Purchase Agreement with another firm, which has become the focal point of several lawsuits.
In October 2024, the company sought arbitration to withdraw from the agreement. By December, both parties had reached a preliminary injunction related to the APA.
Shareholders of the opposing company later initiated lawsuits against the organization and its executives, alleging fraud connected to the APA. Regulatory authorities have also filed fraud charges against the associated firm, as per the company’s claims.
In retaliation, the executives sought a Temporary Restraining Order and a preliminary injunction against their own company, which was granted by the court on February 14.
Allegations of Misrepresentation
The company contends that the injunction was issued based on misleading statements, and it has filed motions to lift these restrictions. It has also presented a transcript from a meeting where one executive purportedly described a method to leverage the court ruling to extract funds from the company.
Shareholders of the other firm have included this transcript in their ongoing lawsuit against the executives in Florida, according to the announcement.
The CEO expressed surprise at a U.S. court’s ability to constrain the company’s financial decisions. “We never imagined that a U.S. court could prevent the company from issuing shares, raising funds, or acquiring Bitcoin—all of which should be determined by the shareholders or the Board, not through legal action,” he remarked.
This court ruling has compelled the company to overhaul its operations, which includes downsizing, shuttering divisions, and suspending sponsorships, marketing efforts, and investments. It has also been unable to provide share-based compensation to employees, which could potentially violate Singaporean labor laws.
“We refuse to bow down to those who engage in deceit and market manipulation, particularly when they are entangled in multiple lawsuits themselves,” the CEO affirmed.
Since the issuance of the restraining order, the firm’s share price has plummeted by 53%, bringing its market capitalization down to 40% of its Bitcoin Treasury value. The company has submitted an emergency appeal to the U.S. Court of Appeals for the Second Circuit in hopes of overturning the injunction.
In November 2024, the company had adopted a Bitcoin-first approach, aiming to utilize Bitcoin as its main treasury reserve asset. While compelled to sell some of its holdings, the company remains committed to Bitcoin and firmly believes in its potential long-term value.