SBI Crypto Sues Riot Blockchain-Owned Data Center For Fraud, Negligence

Bitcoin miner SBI Crypto Co., (SBIC) sues Whinstone US, a data center based in Rockdale, Texas, for misrepresenting its readiness to host a large-scale mining operation and for millions of dollars in damages resulting from delays and poor conditions.

The charges SBI Crypto is pursuing against the data center include “fraud, fraudulent inducement of contract, fraud by non-disclosure, negligent bailment and breach of hosting services agreement,” according to the lawsuit filed yesterday in US District Court for Western. District of Texas, Waco Division.

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

Among the many misrepresentations, SBIC alleges that Whinstone did not conform to industry standards and the facility had frequently informed the miner that building permits, certifications and power contracts were not required for the facility to fulfill its end of the host service agreement.

SBIC signed with the facility in late October 2019, but the lack of documentation later became a stumbling block when, in the months before operations began in June 2020, it emerged that documentation was actually required to turn on the power.

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

SBIC alleges that Whinstone had not secured gigawatts of electricity for its Rockdale facility and did not begin signing power contracts “until shortly before operations began in the summer of 2020.”

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

A representative of SBIC inspected the site in June 2021, and when they opened one of the machines in front of Whinstone’s co-founder and CIO Ashton Harris, they saw “high levels of dust and corrosion build-up.”

During this same visit, it was allegedly observed that Whinstone had supplied other mining customers’ equipment with dust filters, yet failed to do the same for SBIC’s equipment, an omission made more serious for the miner by the fact that “on more than one occasion, Whinstone confirmed with SBIC that dust filters were installed on SBIC’s equipment.”

SBIC’s lawsuit lists several other ways Whitstone misrepresented its services.

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

Is Texas Still Open For Bitcoin Mining?

The state of Texas has so far been one of the most welcoming regions in the world for miners to set up, partly due to an abundance of renewable energy and partly due to the fact that miners can cut their consumption when the grid experiences a peak. levels of demand.

However, a bill was introduced in March, Texas Senate Bill 1751— which seeks to limit incentives for Bitcoin miners who scale up and down their power consumption in line with the grid’s needs — passed unanimously (10–0) in a state Senate committee vote on Tuesday.

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

Texas Blockchain Council President Lee Bratcher believes it could pass the Senate, but not the House. Earlier this week he told Decrypt that local miners should still be concerned about political developments.

“SB-1751 is a concerted effort by established industry groups in the ERCOT market to tilt the playing field in their favor because they cannot compete with Bitcoin miners in terms of load flexibility,” Bratcher wrote in an email.