Bitcoin Miner Hut 8 CEO Exits Three Weeks After Short-Seller Allegations

(Bloomberg) — Hut 8 Corp., one of the largest publicly traded Bitcoin mining companies, named Asher Genoot to succeed Jaime Leverton as chief executive officer, three weeks after a short-seller released a report critical of its recent merger.

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The transition is effective immediately. Genoot served as the chief operating officer and the president of US Bitcoin Corp. Miami-based US Bitcoin, which has large-scale mining facilities across the US including Texas, completed its merger with then-Canadian miner Hut 8 in late 2023.

The leadership transition comes amid increasing competition among miners and a Bitcoin code update set to drastically reduce mining revenue in about two months, as well as a Jan. 18 report from short-seller J Capital Research alleging the merged company was a “pump and dump” waiting to happen. Hut 8 has disputed the claim.

“The report did not drive any actions of what the board did,” Genoot said in an interview. “This conversation was a much larger strategic conversation over the course of the last two months, post-merging as an entity, and this report kind of came in the middle of that.”

He added that the main motivation behind the company’s change in direction was to improve efficiencies and focus on “operational excellence” ahead of the so-called halving, a preprogrammed event expected in April that will reduce Bitcoin mining rewards by half and make mining profit margins much thinner.

Shares of Hut 8 tumbled as much as 26% when the J Capital report was issued, which was also the day company officials rang the bell to open trading on the Nasdaq stock market. Hut 8 closed down 1.7% to $6.76 on Wednesday.

While Bitcoin prices have been on a tear, crypto-mining companies are ramping up their operations to compete for mining rewards, a fixed amount of new coins released from the Bitcoin blockchain to miners that successfully verify transactions on the network.

Bitcoin mining is an energy-intensive process, in which the more computing power a miner has, the more likely they will win the reward. Mining difficulty, a measure of computing power needed to mine Bitcoin, has broken all-time highs over the last year, meaning a miner has to spend more money on new mining computers and power to get the same amount of reward.

The “halving” will reduce Bitcoin mining rewards by half in April. The quadrennial update is part of Bitcoin’s code that is designed to maintain an ultimate cap of supply at 21 million Bitcoin.

The J Capital report accused Hut 8 of a slew of issues including undisclosed stock ownership, connections, and low efficiency of its operations, which could be detrimental after the halving. Some major miners have acquired large amounts of new machines and power plants to increase efficiency while decreasing operating costs.

While Hut 8 has said that J Capital’s claim about the company’s high mining cost is not accurate, Genoot acknowledged that there “hasn’t been that much growth” compared with the rest of the Bitcoin mining sector.

During Leverton’s three-year tenure, Hut 8 became one of the few crypto-mining companies that can also provide its customers, including some artificial intelligence startups, with high-performance computing services, besides its Bitcoin mining businesses.

(Updates with comments from new CEO Genoot in fourth, fifth and 11th paragraphs.)

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