Riot Blockchain’s CEO is pushing back against critics and trying to convince the world his company is serious about crypto (RIOT)

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  • Riot Blockchain, one of the first companies to pivot to blockchain and see its stock skyrocket, has been accused of fraud.
  • In an interview with Business Insider, CEO John O’Rourke denied the accusations and outlined Riot’s plan to fully realize its pivot to cryptocurrencies. 

When Bioptix, a biotechnology equipment maker, announced in October it was changing its name to Riot Blockchain in order to focus on cryptocurrencies, its stock skyrocketed.

Shares of Riot, which had been trading for less than $10, eventually gained more than 400% — topping out at $46.20 in December when bitcoin was near its all-time high and crypto mania seemed to be in full swing.

“Did we have any idea what the market reception would be? Absolutely not,” CEO John O’Rourke told Business Insider in an interview Wednesday. “We never could have predicted that type of market reaction.”

Nevertheless, that market reaction to blockchain mania is at the core of accusations against Riot and its executives, including O’Rourke.

Bitcoin mania began to fizzle after the new year. The price of bitcoin, which shares of Riot had seemed to mirror in its rise, began to see dramatic price swings of 20% in either direction.

That volatility, coupled with a damaging investigation by CNBC that O’Rourke has called demonstrably false, have pushed the stock down 72% to back near its pre-pivot lows. Despite the investigation — and a lawsuit filed this week in New York alleging the opposite — O’Rourke maintains Riot has made significant investments in both cryptocurrency mining and exchanges.

In January, Riot successfully acquired 500 government-seized bitcoins in a Department of Justice auction. O’Rourke declined to disclose the amount paid for the lot, but it’s likely Riot received a significant discount compared to public exchanges thanks to the volume.

Then, in February, Riot announced a 12.5% stake in Canadian cryptocurrency exchange Coinsquare as part of its ongoing initiative to get into the exchange business. The company plans to open a cryptocurrency exchange within four years.

“I believe the market right now in the US is in real need of additional competitors that are willing to go about it the right way,” O’Rourke said. “Right now you really only have two main competitors for US retail customers.”

The company is also aggressively scaling its mining operations, with 8,000 mining rigs slated to come online this quarter. The set up could net Riot thousands of BTC per year in mining rewards, depending on the difficulty ratings of the network, which change depending on network demand. “Our ultimate goal is to accumulate a significant amount of bitcoin,” O’Rourke said.

Here’s a look at the company’s installation so far:

Riot Blockchain Bitcoin mining rigs S9 AntminerRiot Blockchain

To be sure, Riot is still far from profitability. Its most recent quarterly filing for the three months ending September 30 shows an accumulated deficit of $120.8 million and a quarterly loss of $0.98 per share.

“We’re looking probably three to four years down the road before we’re able to generate real fundamentals,” O’Rourke said. “The way we look at it is we can plant various seeds in different blockchain technology companies when that does happen.

“Near term, out focus is going to be on cryptocurrency mining as a great way to get leveraged exposure to bitcoin.”

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