Regulators Turn Spotlight on Crypto-AI Ties After Northern Data Raids

German prosecutors have confirmed police raids on Northern Data AG, a Frankfurt-listed technology firm majority-owned by Tether Holdings Ltd. and previously known for its role in cryptocurrency mining. The raids, conducted on Thursday, were disclosed by the Frankfurt prosecutor’s office, which declined to specify the targets or the nature of the investigation. Further details are expected to be released on Monday. Northern Data’s shares fell as much as 12% following the announcement, reflecting investor concerns over renewed legal scrutiny for a company already embroiled in prior controversies.

Northern Data, which transitioned from cryptocurrency mining to artificial intelligence (AI) computing infrastructure in recent years, manages over 22,000 AI chips across European facilities. The company recently signed a partnership with Abu Dhabi-based AI firm G42, granting the latter access to half of its AI computing capacity. This shift aligns with broader industry trends as demand for AI hardware surges. However, the company’s crypto origins—once a key supplier of computing power for bitcoin mining—have drawn regulatory and environmental scrutiny.

The firm’s majority ownership by Tether Holdings SA, the issuer of the world’s largest stablecoin (USDT), adds another layer of complexity. Tether itself has faced persistent regulatory questions regarding its reserves and transparency. Northern Data’s ties to Tether have been further amplified by recent developments, including a potential all-stock acquisition offer from Rumble Inc., a conservative YouTube alternative in which Tether also holds an investment. The proposed $1.17 billion deal, if finalized, would mark a significant consolidation of Tether-backed assets.

This latest investigation comes amid a history of governance disputes. In 2024, two former directors accused Northern Data of financial misrepresentation and tax evasion, allegations the company denied. Though the case was later dismissed, the episode highlighted internal governance weaknesses. Prosecutors have not yet clarified whether the current investigation relates to past disputes, financial reporting, or entirely new matters.

The raids underscore the regulatory risks facing firms operating at the intersection of digital assets and emerging technologies. Northern Data’s pivot to AI infrastructure has positioned it as a key player in Europe’s rapidly expanding AI sector, which is attracting substantial investment from governments and private entities. However, any allegations of financial improprieties could prompt broader regulatory scrutiny for companies with crypto ties. For Tether, the association with Northern Data—amid its own legal challenges—risks further reputational damage.

Market reactions have been immediate and severe. Northern Data’s stock dropped 8% by mid-afternoon in Frankfurt, exacerbating a declining trend that has persisted for months. Analysts note that the company’s leadership overhaul, including the promotion of COO John Hoffman to co-CEO, may reflect efforts to stabilize operations amid uncertainty. Yet, the raids introduce new volatility, particularly as the firm navigates a potential merger with Rumble and its role in the AI infrastructure boom.

The outcome of the investigation remains uncertain, but its implications extend beyond Northern Data. If prosecutors uncover misconduct, it could set a precedent for stricter oversight of companies blending crypto origins with AI advancements. For now, the Frankfurt prosecutor’s office has provided no timeline for its findings, leaving stakeholders and investors in a state of anticipation as the weekend unfolds.