Two former executives of Northern Data, a publicly listed German company for crypto and AI infrastructure that is backed by Tether, claim they were fired after raising concerns about alleged fraud committed by the company's CEO and COO.

In a lawsuit filed in California District Court last month, Joshua Porter and Gulsen Kama allege that Northern Data "misrepresented the strength of its financial position to investors, regulators, and business partners" and "knowingly engaged in tax evasion amounting to potentially several dozen million dollars.

Northern Data vehemently denies the allegations and stated: "We categorically deny the allegations and will vigorously defend ourselves against false claims that harm our company and business." Integrity is of the utmost importance to Northern Data Group and its leadership. As a publicly listed company, we have comprehensive policies and procedures to ensure the accuracy of financial reporting. The financial statements for 2022 received an unqualified audit opinion, and we will soon release the audited financial data for 2023.

Northern Data was also in the headlines this week for other reasons, as Bloomberg News reported on Monday that the company is considering a US IPO for its AI cloud computing and data center businesses. Banks vying for a role have suggested valuations of around $10 billion to $16 billion, compared with a market capitalization of 1.3 billion euros ($1.4 billion) as of Monday evening.

Northern Bitcoin, which went public in 2018 as a pure crypto miner, changed its name to Northern Data as it grew through acquisitions in high-performance data centers. The company plans to open cloud computing facilities in the US and UK, in addition to its eight crypto mining locations, six of which are in North America.

Stablecoin issuer Tether holds 51 percent of Northern Data shares after a “strategic investment” was agreed upon last year, which included the exchange of Nvidia GPUs for shares and a shareholder loan. The accusations from former directors date back before this involvement.

Joshua Porter was appointed Chief Operating Officer of Northern Data’s US subsidiary in April 2022 and promoted to President and CEO of North America in January 2023. He was dismissed in March 2023 after pointing out the “nearly insolvent” financial situation of the German parent company to his superiors, according to the lawsuit dated June 21, 2024.

Gulsen Kama was appointed Chief Financial Officer of North America in July 2022 and was promoted to Deputy Group Chief Financial Officer about two months later. She claims that she actively worked to prevent the company from misrepresenting its financial situation to potential auditors, tax advisors, and investors. Despite repeatedly warning those responsible that they were committing fraud, she was dismissed in June 2023.

Northern Data has redacted parts of the complaint as confidential and protected by attorney-client privilege. The plaintiffs reserve the right to challenge this decision.

The company has filed a motion to dismiss the lawsuit, arguing that the allegations are unfounded and made in a state that has no jurisdiction. The hearing is scheduled for August 19.

The full complaint and the motion to dismiss can be viewed here.

This conflict could have far-reaching implications for Northern Data and its future business strategies, particularly with regard to the planned expansions and the planned capital increase.