-Riot made a dramatic pivot from a “life science tools” business to a blockchain company mere months ago. -The company paid approximately $12 million for a two-week-old crypo-mining entity that owned only about $1.9 million in crypto mining assets. A second acquisition raises additional red flags. -Riot depleted an estimated 63% of company cash through a special dividend that appears to have disproportionately advantaged insiders. -Regardless of one’s views on blockchain technology, we believe Riot is a name that should be avoided.

Riot filed a registration for ~3.3M shares of common stock & common stock issuable upon warrant exercise, representing potential selling pressure for a stock with only ~11.6M common shares outstanding. The registration statement was reported Friday after the close. Riot dismissed and replaced its auditor, reporting the event Friday after the close. The company has had 3 different auditors within the span of a year. A new audit reported Friday after the close sheds light on Riot’s bizarre approach to purchasing (and overpaying for) cryptomining assets. The CEO recently sold about $869,256 worth of his shares, reporting the event Friday after the close heading into the long New Year’s weekend.

Despite a Friday CNBC investigative piece highlighting red flags with Riot and precipitating a 33%+ share decline, the company filed an 8-K later that afternoon raising bright new red flags. The filing was released during a market “dead zone”; Friday after the close heading into the long holiday weekend. It detailed a dubious agreement. We estimate that Riot’s new agreement implies an over-payment of about $18.5 million for bitcoin mining equipment purchased from a seemingly undisclosed related party entity. We found other entities related to a Riot subsidiary that raise additional questions. Riot’s latest questionable transaction strikes us as particularly brazen in light of the intense public scrutiny the company has seen recently.

Riot reported yet another dubious transaction via 8-K during a market “dead zone” – Friday after the close. Riot is paying a $4 million upfront consulting fee to a believed undisclosed related party entity. Just last week we had identified the entity, Ingenium International LLC, as being highly suspicious. Collectively, Riot’s series of suspicious transactions are among the most brazen irregularities we have seen in a U.S. listed company.