Compass Mining Accused of Fraud and Breach of Contract

  • January 24, 2023

A group of customers from Compass Mining Inc, a Delaware corporation, has filed a civil action against the company for allegedly engaging in fraudulent activities, seeking damages exceeding $2,000,000.

The customers claim that they purchased hosting services and Bitcoin miners from Compass Mining. However, the company failed to return Bitcoin mining machines, citing a non-applicable United States sanction as the reason for cutting ties with Russian hosting company Bit River.

Reportedly, Compass Mining has failed to provide reliable data centers and stable power rates, as promised, implied in the court filings.

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According to the court document, Compass Mining issued a notice in April 2022 that it had terminated its “relationships and dealings” with Bit River due to the sanctions imposed by Executive Order 14024.

The document alleges that Compass “did not offer” to return or even retrieve the assets its customers had entrusted the company with, which were hosted at Bit River’s facilities in Russia.

However, the document claims that it is “false” that the return of the mining machines would violate Executive Order 14024, which prohibits dealings with sanctioned entities. The court document further noted:

Specifically, according to FAQ 1504, Compass has both the right and the obligation to effect the return of its customers’ miners.

Source says that when customers reached out to Compass with concerns, the company allegedly met them with hostility. It stated that it was unable to conduct or even facilitate any business dealings with Bit River.

Bit River, in turn, allegedly pointed customers back to Compass, stating that all equipment was owned by Compass and that customers should address all questions directly with the company.

The partnership with Bit River was originally intended to enable Compass’ customers to host their machines at Bit River’s facilities, which would provide “enterprise-grade, low-cost and low-carbon cryptocurrency mining facilities in Russia.”

However, the court document states that Compass’ promise of 95% uptime for the machines was inaccurate and that it was actually “closer to 50-60%.” In some instances, miners were not online at all for weeks or months.

In other news, ConsenSys announced that it will be slashing the workforce by 11%.

Aaron S. - Expert Reviewer

by Aaron S. – Expert Reviewer, BitDegree

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