Riot Blockchain has engaged in several suspicious transactions that enrich insiders. Its latest transaction is paying $4 million upfront to a consulting firm called Ingenium that Hindenburg Research previously identified as a likely related party. The short seller believes Riot's transactions are among the most brazen they have seen in a US public company and questions remain about potential misuse of shareholder funds. A new director, Remo Mancini, was also appointed to key board positions.

1. Hindenburg Research February, 26, 2018
Riot Blockchain: Yet Another Suspicious,
Cash-Depleting Transaction
• Riot reported yet another dubious transaction via 8-K during a market "dead zone";
Friday after the close.
• Riot is paying a $4 million up-front 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.
Introduction
We genuinely thought we were done writing about Riot Blockchain (NASDAQ:RIOT) after our first
article in early December. After all, what more needed to be said?
1. We had called the company out for making an arguably absurd "pivot" from a medical device
company to a blockchain company.
2. We had identified that the company overpaid by about 6x for equipment purchased through
a highly suspicious, newly-formed entity.
3. We had identified that a special dividend seemed to disproportionately enrich insiders.
4. We had identified that Barry Honig, an individual with a controversial past, seemingly had an
influential behind-the-scenes stake in the company.
That should have been enough.
It also should have been enough when we wrote our second article on January 9th, entitled "Riot
Blockchain: This Crypto Clown Car Continues Hurtling Toward The Abyss".
After all, what else could there be?
We had reinforced our earlier research by identifying numerous issues with:

2. • Believed related party transactions
• Multiple auditor switches
• The company's pattern of reporting seemingly negative news on Fridays after the market close.
Subsequent to that second article, the Wall Street Journal, the Denver Post, and CNBC corroborated
and expounded on our research with exposés of their own. The stock plummeted, particularly after
the CNBC piece.
Our second article even made a cameo appearance in one of Riot's growing list of class action lawsuits
(1, 2, 3)
Our rather absurd headline is now forever cemented in the records of Florida's Southern District.
Great! Now we were done. Totally...
But then...despite all the scrutiny by us, by media outlets, by other independent bloggers, and by
numerous financial professionals (except for Dennis Gartman)...despite all of it, something
remarkable happened.
On Friday February 16th after the market close the company reported yet another 8-K detailing what
we believed to be its most brazen transaction yet: The company overpaid by an estimated $18.5 million
for equipment purchased from a believed undisclosed related party entity.
WE HAVE SO MANY OTHER THINGS TO DO. There are all manner of companies we are
researching that engage in questionable business practices, "creative" accounting, or other believed
improprieties. We have several reports coming out in the next couple weeks that we think will be
brand-new and highly impactful.
But we just couldn't help ourselves. The transaction struck us as just too brazen. So we wrote a third
article, titled "Riot Blockchain's Brazen Disclosure Issues Continue".

3. Finally! After showing what we believed to be clear, new related-party transactions...we were done?
It's Not Over
Just prior to leaving the office on Friday we had a cynical thought:
"Gee, what wackiness might Riot report after the close today?"
We were half joking, but we went ahead and checked EDGAR anyway. Sure enough, another 8-K
popped up from Riot Blockchain, having been filed yet again on a Friday after the market close.
A Consulting Agreement Unlike Any We Have Ever Seen
Before
The new Friday February 23rd 8-K described how earlier in the week (on Wednesday February 21)
Riot entered into a consulting agreement with an entity called Ingenium International, LLC
("Ingenium"). The filing stated that Ingenium would "provide consulting services related to the
Company's business for a 12 month period" in exchange for consideration of $4 million in cash. The
services described included installing, deploying, and monitoring the crypto-currency miners that were
recently purchased by the company.
All seemed vaguely plausible at that point, despite the fact that a supposed blockchain company might
be expected to have the in-house expertise to deploy its own crypto-mining equipment without
shelling out millions to outside consultants.
But putting that aside for the moment, our first sign that this consulting agreement was highly irregular
were the payment terms:
In consideration of the Services to be rendered by Consultant hereunder, during the Term the
Company agrees to pay to the Consultant (A) $4,000,000 (the "Cash Payment") upon execution of
this Agreement.
Given that the consulting services are supposedly meant to take place over 12 months, we find it odd
(to say the least) that the $4 million is to be paid up-front upon signing.
Our second sign that the consulting agreement was highly irregular was that we had already reported
that Ingenium appeared to be a suspicious and apparently related party entity of Riot on literally the
same day that Riot signed the agreement with them.
In our article from February 21st under the header "A Variety of Other Entities Raise Additional
Questions" we named Ingenium as one of two entities that appeared to be an undisclosed related party
of the company. We didn't know at the time whether or what business the entity had transacted with
the company. The key link we identified however was that the same individuals listed on corporate
records for Ingenium matched the names of individuals listed on corporate records for Kairos Global
Technology Inc, a subsidiary Riot.

4. As we wrote in the same section of the article:
Our overall concern with these potentially related entities center around whether shareholder funds
could be misused via investments that pass through them.
At the time (i.e.: 5 days ago) we even took the time to email Riot's investor relations and ask whether
the company or any of its affiliates or related parties engaged in transactions with Ingenium
International LLC or any of the other believed related party entities. We didn't hear back.
Just for sport, we emailed investor relations again and asked again whether Ingenium is a related party.
We also asked "Why did you opt to pay the entire $4 million consideration upon execution of the
consulting agreement rather than pay over the term of the agreement or upon completion of the actual
services the consultant is hired to perform?" We have not heard back as of this writing. Should we
hear back from the company we will update this article with their responses accordingly.
Needless to say, we still maintain our original concerns about Riot's transactions with seemingly related
entities.
Director Resignation
The same 8-K reported that Eric So, who was originally appointed director in October 2017, had
resigned from the board. In his place, an individual named Remo Mancini was appointed to a variety
of important board positions:
"The Audit Committee (Chairman), Nominating and Governance Committee and Compensation
Committee of the Board of Directors. Mr. Mancini was also appointed to serve as Lead Independent
Director of the Board of Directors."
Mancini is the owner and President of Sandstone Strategies, which according to his LinkedIn profile is
"a Professional Directorship Corporation facilitating Remo Mancini's service on Boards of Directors."
Conclusion
We have seen a lot of ridiculous things in our day, but we believe Riot has engaged in some of the
most brazen activity we have seen in a U.S. listed equity.
Disclosure: We are short shares of Riot through options
We wrote this article ourselves, and it expresses own opinions. We are not receiving compensation
for it. We have no business relationship with any company whose stock is mentioned in this article.
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