Two senior managers who left the company took Northern Data to court on charges of fraud, claiming that they were dismissed for blowing the whistle. This casts a dark shadow over Northern Data’s future and its IPO plans.

According to the lawsuit filed in the Central District Court of California, former Northern Data executives Joshua Porter and Gulsen Kama claim that the Frankfurt-based company misrepresented its financial situation by misleading investors and authorities and potentially committed tens of millions of dollars of tax evasion.

Porter, who was dismissed in March 2023, claims that Northern Data is in a financial difficulty due to high tax debts and is on the verge of bankruptcy. Kama, who was fired three months later, goes further and accuses Northern Data CEO Aroosh Thillainathan and COO Rosanne Kincaid-Smith of financial misconduct.

According to the Financial Times, international auditing company KPMG also expressed concerns about Northern Data’s “cash flow situation”. These concerns led to the company’s subsequent decision to replace its audit firm with Liebhart & Kollegen.

Northern Data has yet to publicly comment on the accusations. However, this situation overshadowed the company’s future plans. Northern Data plans to launch an initial public offering (IPO) in the United States next year as a combined company for its artificial intelligence (AI) cloud computing and data center businesses.

The IPO is expected to position the company’s valuation somewhere between $10 billion and $16 billion, according to Bloomberg’s sources. The Frankfurt-based company is also considering selling a minority stake in the unit to investors before the IPO.

These developments pose a major obstacle to Northern Data’s IPO. Investors can leave the company vulnerable to allegations of financial abuse and tax evasion. Additionally, the lack of transparency in the company’s financial statements may make it difficult for investors to evaluate Northern Data’s true financial health.

But Northern Data’s situation is not limited to financial scandals. The Bitcoin mining industry is also becoming increasingly competitive. The introduction of more efficient hardware and rising electricity costs could negatively impact Northern Data’s profit margins.

It is seen as a positive development that in September 2023, Tether announced a collaboration with Northern Data to focus on initiatives in the field of artificial intelligence, peer-to-peer communications and data storage solutions. However, Tether did not make any statement about the financial aspects of the agreement. Some news outlets even denied claims that Tether spent $420 million to purchase 10,000 H100 GPUs from Northern Data.

Northern Data undoubtedly faces a tough challenge in the coming period. On the one hand, the company will have to defend itself against accusations of fraud by its former employees, and on the other hand, it will try to survive in increasingly difficult market conditions.

To achieve its IPO goals, Northern Data must both ensure financial transparency and provide a clear explanation for allegations of financial misconduct. Otherwise, investors’ confidence in Northern Data may be damaged, which may negatively affect the future of the company.