SBI Crypto sues Riot Blockchain-owned data center for fraud and negligence

Bitcoin miner SBI Crypto Co., (SBIC) is suing Whinstone US, a Rockdale, Texas-based data center, for misrepresenting its will to host a large-scale mining operation and for millions of dollars in damages due to delays and substandard conditions.

The charges SBI Crypto is pursuing against the data center include “fraud, fraudulent inducement of contract, fraud by nondisclosure, negligent bonding, and breach of hosting service contract,” according to the complaint lodged yesterday with the United States District Court for the Western District of Texas, Waco Division.

Riot Blockchain acquired Whinstone US for 11.8 million common shares and $80 million in cash in May 2021.

Among the many misrepresentations, SBIC maintains that Whinstone did not comply with industry standards and that the facility frequently informed the miner that building permits, certifications and electrical contracts were not required. for the facility to fulfill its part of the hosting service contract.

SBIC signed with the facility in late October 2019, but the lack of documentation later became a stumbling block when it emerged in the months leading up to operations beginning in June 2020 that the documentation was, in fact, necessary for turn on the power.

As part of the original agreement, Whinstone assured the miner that it had “secured for commercial access up to one (1) gigawatt of aggregated electricity that can be delivered to the data center, a portion of which may be incrementally offered to [SBIC].”

SBIC alleges that Whinstone failed to secure the gigawatt of power for its Rockdale facility and only began signing power contracts “just before operations began in the summer of 2020.”

SBIC also claims that Whinstone never delivered on its promise to deliver 20,000 mining machines to the site, dropping from a fleet of 16,200 in September 2020 to 14,600 in April 2021.

An SBIC representative inspected the site in June 2021, and when they opened one of the machines in front of Whinstone co-founder and CIO Ashton Harris, they found “high levels of dust buildup and corrosion “.

During that same visit, it was reportedly observed that Whinstone provided other mining customers’ equipment with dust filters, but failed to do the same for SBIC’s equipment, an omission made even more egregious. for the miner by the fact that “on more than one occasion, Whinstone has confirmed to SBIC that dust filters have been installed on SBIC’s equipment.

The SBIC lawsuit lists several other ways Whitstone misrepresented its services.

Decrypt contacted all relevant parties but did not receive an immediate response.

Is Texas still open to Bitcoin mining?

The state of Texas has so far been one of the friendliest areas in the world for miners to settle, partly because of the abundance of renewable energy and partly because miners can reduce their consumption when the network experiences peaks. demand levels.

However, a bill tabled in March, Texas Senate Bill 1751– which aims to limit incentives for Bitcoin miners who increase and decrease their energy consumption according to the needs of the network – adopted unanimously (10–0) in a state Senate committee vote Tuesday.

The bill awaits federal Senate approval before heading to the Texas House of Representatives and then to Governor Greg Abbott’s office.

Texas Blockchain Council President Lee Bratcher thinks he can pass the Senate, but not the House. Earlier this week he said Decrypt that local miners should always be concerned about political developments.

“SB-1751 is a concerted effort by established industry groups in the ERCOT market to tip the scales in their favor as they cannot compete with Bitcoin miners for load flexibility,” Bratcher wrote in an email. mail.

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