Tether-Backed Northern Data Hit With Lawsuit From Former Execs Alleging Fraud and Tax Evasion

In late 2023, Tether, the world's largest stablecoin, announced it was taking a significant stake in Northern Data

Tether, the world’s largest stablecoin, announced in late 2023 that it was acquiring a sizable stake in Northern Data, a company that was initially known for Bitcoin mining but has since expanded into artificial intelligence.

Former executives of Northern Data’s North American division have filed a lawsuit against the company, alleging securities fraud, tax evasion and whistleblower retaliation.

The lawsuit was filed by Joshua Porter, the former CEO and president of Northern Data US, the company’s North American subsidiary, and Gulsen Kama, the former chief financial officer of Northern Data US.

The lawsuit alleges that Northern Data routinely misled investors about its financial health, even as executives like Porter and Kama raised concerns about the solvency of the parent company, an issue that came to a head in early 2023 when KPMG insisted on performing a liquidity forecast before signing off on its audit.

Kama felt that the financials were being misrepresented to KPMG, and as the engagement with the auditor kept getting pushed back, Aroosh Thillainathan, the founder and CEO of the parent company, allegedly insisted that the firm find a new auditor and said that it "didn't matter who the auditor was, as people didn't care."

Thillainathan also allegedly told Kama that the Legal and Finance departments were acting as “road blockers,” which were preventing him from finding new opportunities for the firm, and that these departments were meant to "execute deals that were negotiated… no questions asked."

The lawsuit also alleges that Northern Data was mismanaging the revenue of its North American division, with the complaint stating that the company was “committing tax evasion to the tune of potentially tens of millions of dollars.” Porter had allegedly insisted that “Northern Data should recognize its profits in the United States (and thus pay taxes thereon)." However, management disagreed.

Both Porter and Kama also allege that they were fired from their respective roles in retaliation for raising these issues.

Financial Times reporting claims that Tether is the majority owner of Northern Data, with 51% of the stock.

Protos has reached out to both Northern Data and Tether for their response to these allegations, but at press, they have not responded.

The allegations in this lawsuit echo earlier issues raised by Germany’s financial regulator BaFin in 2021, which alleged that Northern Data had engaged in market manipulation related to misrepresentations in 2019. While BaFin had referred the complaint for potential criminal prosecution, prosecutors ultimately decided not to pursue the case.

Protos has reached out to Tether for comment but had no response at time of publication.

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