After Less Than Four Months’ Service, The Chairman Of Riot’s Audit Committee Of The Board… Resigned

As we mentioned last night, Mr. Eric So, a Canadian lawyer (L.L.B.) and “designated financial expert” — also a board member of publicly traded (on the Toronto Exchange, and for those of you keeping score at home, it looks like Mark Groussman suggested him — for this seat, in June of 2017) Therapix Biosciences Ltd…. resigned from Riot’s board of directors, effective as of the date of the CNBC exposé on the company.

His departure comes after just under four months on the job.

This departure ALSO comes on the heels of the company having dismissed its third set of independent auditors in under two years, and the last two — in under a year.

Aside from the various shenanigans only disclosed last night, about idle, and crated Antminers (and no facility to even place them in; just negotiations, in Oklahoma, with an unnamed landlord) — and the sheer amount of Riot common stock being privately sold/issued to the people and companies involved in those transactions — I would suggest that the year end financials, due in a few weeks… will be replete with additional adverse disclosures.

That is, if the company files its Form 10-K timely, at all. I suspect the company will be late in filing. I suspect this because it still hasn’t announced GAAP Q4-, and year end-2017 results — by press release — and we are approaching 60 days since year end, after Mr. O’Rourke’s sale of essentially all his vested Riot stock, at $28.60 (yet the stock is only a little over $10, at Friday’s NASDAQ close).

Oh — I will also mention that this is now the second Riot audit committee chairman to resign, in under a year.

And… I will remind that Mr. O’Rourke still hasn’t disclosedhow much he paid for the 500 bitcoin he bought from the US Marshals.

That is so, because I am all but certain he paid perhaps 30 per cent to 40 per cent more that the $9,700 per coin that is the spot bitcoin price, as I write this.  He is underwater, and because the $6 million he spent was cash, and was material — the company must treat it on its list of financial instruments held/currencies invested (and disclose related unrealized losses — Level 2, or Level 3?), or… treat it as a material acquisition of assets — another new business segment — but then the company may become an “investment company”, and fall under the regulations of the 1940 Act. Moreover, if it takes that route, Riot is egregiously overdue in filing the required SEC Form 8-K for the acquisition of assets. SO Riot’s auditors are now likely preparing an additional schedule to the investing/financial instruments held table, in last year’s 10-K — that shows wild volatility in the “currency” called… bitcoin.

Add to this all the conflicting and misleading statements made to the press by Mr. O’Rourke in the past six weeks, alone — and one can readily see why Mr. So might not want to continue to risk his law license, as chairman of this public company’s audit committee.

Mr. O’Rourke told a reporter on the record that his 500 bitcoin would be worth $50,000 per coin, in under a year. Uh-huh. The nutty bulls (and hge holders of coin) called Winklevoss are only predicting that, on a decade long horizon.

Mr. O’Rourke also sent a reporter a photo what purports to be the company’s over 1,000 operating Antminers… and then the next day he filed an SEC Form 8-K saying that — except for a much smaller (but still undisclosed) number of initial Antminers, none were currently operating — and in fact, he is still negotiating with “a landlord” (cough! privately-held Intermedix?), to arrange for space to house (and eventually power up) all these overpriced Antminers.

The guy is a walking securities law liability generation machine.

Now you know.

So I can now predict, with two thirds of Q1 2018 already effectively over, and Riot not even started on mining bitcoin in any meaningful way… that the masthead guess of a best case $4 million in revenue should be cut in half — it will likely be well-below $2 million, on the full calendar year 2018. The company isn’t really even a serious, operating large scale miner yet.

All of which ironically fits with his candid (but then apparently withdrawn) comment — to the BusinessInsider reporter — that he is still “three to four years away from having a sense of the fundamentals” in this business.

This company’s NASDAQ price is headed south early next week — as the broader market gets wind of all these “hide-the-ball” facts.