Bitcoin miners face financial woes as Limestone lawsuit settlement remains incomplete | WJHL

LIMESTONE, Tenn. (WJHL) — It was June 9 when Bitcoin miner GRIID CEO Trey Kelly personally spoke to Washington County residents angry about a noisy Bitcoin mine in Limestone. That night, after grilling Kelly and extracting several concessions, county commissioners agreed to terms to settle their lawsuit against GRIID subsidiary Red Dog Technology and local utility BrightRidge.

News Channel 11 has learned that was also the date GRIID received its first letter from its creditor, Blockchain Access UK Limited, claiming that GRIID had breached its credit agreement with Blockchain.

“If GRIID is unable to resolve its dispute with Blockchain or secure additional new financing, it will likely be unable to repay the amounts due and payable under the Credit Agreement, which would likely render it insolvent and likely result in a bankruptcy filing…” reads a document from the Securities and Exchange Commission from a company that has been set to publish GRIID since November last year.

Referring to the June 9 negotiation, Tim Hylton, who lives just uphill from the mine, told News Channel 11 Thursday, “it was a done deal as far as I was concerned.”

Three months have passed since the parties negotiated an agreement that even county commissioners believed was final pending the BrightRidge board’s consent, which came June 10. In it, GRIID would buy 5 acres in the Washington County Industrial Park, build a new (and Kelly said quieter) mine there, and leave Limestone for good no later than the end of 2024, but likely much sooner.

The company would also pay Washington County $500 per day retroactive to September 2021 — which is when the county ordered BrightRidge to close the mine due to an alleged zoning violation — and until the mine closes in Limestone.

Commissioners soon found that a “final final” version had to be completed by lawyers for both sides of the case, who alleged that the mine violated the county’s A-3 zoning ordinance and that it opened without obtaining a permit. County Attorney Allyson Wilkinson has told commissioners that she provided GRIID representatives with details of what the county needs from them, including a specific area at the industrial park, by the end of June.

Several commissioners told News Channel 11 that by mid-September they had received nothing to go back through a committee and on to the full commission for an up or down vote.

Meanwhile, the noisy fans cooling powerful, energy-hungry computers at Red Dog’s Limestone mine continue their dull roar, clocking in at 50 decibels on Hylton’s decibel meter this week. These computers perform highly complex equations in an attempt to “mine” the digital cryptocurrency Bitcoin, and to verify Bitcoin transactions. They use huge amounts of electricity, in this case sold by BrightRidge, which leases the GRIID property next to the Bailey Bridge Road substation.

“Not much we can do,” Hylton said Thursday, standing at the edge of his property with bright purple railroad flowers blooming just behind him and the mine site, surrounded by sound-absorbing fences but still emitting a constant and very noticeable noise, a couple a hundred meters further in the background.

“We’re just waiting for them to settle in and hope that the noise will go away and our lives will be like they were before they got here.”

The Hyltons can always hear the mine at the back of their home, which sits atop a wooded hill.

“We always go ahead to stay away from the sound,” he said. “It’s just a constant roar, and something that’s not natural for this area. You know, we hear tractors, we have cars going up and down the road, but they come and go. This never stops.”

BrightRidge, the original defendant in a lawsuit filed in November 2021 after it refused to shut down GRIID’s mine, has begun offering free fiber internet to some households near the mine as agreed in the preliminary settlement. GRIID later became an additional defendant in the case under Red Dog’s name.

“The new broadband is amazing,” Hylton said, adding that he and his wife were able to flip the switch about three weeks ago from slow and spotty DSL Internet, which was all he and many neighbors had in this rural section of the county had available. .

“They’ve done a really good job and it’s really fast – a lot better than I really thought it would be,” Hylton said at his home when a speed test showed his tablet with very fast upload speeds of close to 400 megabytes per second.

GRIID’s restrictive credit agreement

But while BrightRidge proactively began working on its primary offer in the settlement, GRIID attorneys have not returned necessary materials that would allow the county commission — now with seven of its 15 members changed since the August election — to vote again on whether to finalize the settlement. The case remains active pending finalization of the settlement, and commissioners could choose a jury trial, which was set for July, but was averted when the parties reached their not-quite-final agreement in June.

Judging by the “Risk Factors” section of a quarterly Securities and Exchange Commission (SEC) report from the shell company that announced late last year that it would take GRIID public, creating a $3 billion company, GRIID’s legal counsel may have other fish to eat fry.

The second quarter report of Adit Edtech, a “Special Purpose Acquisition Company” created expressly to go public with GRIID, was filed on August 15. It says Blockchain, whose “Third Amended and Restated Credit Agreement” with GRIID provided a line of up to $525 million, “claimed an alleged event of default” and said it would seek to force accelerated repayment from GRIID.

The exact amount GRIID owed Blockchain at the time is not disclosed in any of the documents that are public, but another Adit Edtech SEC filing from March 22 shows that GRIID had an “accumulated deficit” of $24.6 million as of December 31 , 2021.

The same March filing, also under the “Risk Factors” section, talks about conditions in the credit agreement that “impose significant operational and financial constraints on GRIID.” The funding also required GRIID “to maintain specified financial ratios and satisfy other financial condition tests.”

The March filing also hinted that Blockchain itself could one day end up with the Limestone plant in its hands.

“… if GRIID was unable to repay the amounts due under the credit agreement, the lenders could proceed against the collateral securing the debt,” the filing said.

The more recent SEC filing says GRIID received letters on June 9 and 11 from Blockchain, then “rejected Blockchain’s allegations” on June 12.

However, the section goes on to say that GRIID “is in discussion with Blockchain regarding these issues” and is also in discussions with other lenders. At the time of the filing, it was “unclear whether additional funding will be completed.”

A filing from this week shows that Adit EdTech and GRIID have found a company interested in buying up to $200 million in GRIID stock if the merger goes through and the company goes public.

News Channel 11 emailed Trey Kelly on Sept. 13 asking if the issues had been resolved, but has not received a response. A similar email to Adit Edtech’s CFO has also gone unanswered.

Back in Limestone, Hylton said he doesn’t quite know what to make of the new revelations.

“We were just very happy that we had some sort of solution, or thought we did.”

As for GRIID, “I don’t want to see anything bad happen to anybody, as far as financially. I just want them to go away from me.”

Hylton said he has been pleased with BrightRidge’s response since the mine went in, and not just because of BrightRidge internet, which the agreement said would be free until the mine was gone.

“They’ve been pretty diligent about reading audio, and if I call to ask something, they’re always Johnny on the Spot,” he said of the tool. “They’ve been very cooperative in helping me understand what’s going on.”

He’s not giving BrightRidge a full pass, but he thinks they missed early opportunities — in 2020, when they sought a rezoning — to be open about plans for the property.

“I contacted the person who used to own the property before BrightRidge bought it,” Hylton said of additional acreage around the substation that BrightRidge bought in January 2020, a month before the rezoning.

“He had been told it would be a solar farm or a communications centre. So we thought everyone in the community, we were hoping for a solar farm, but a communications center would have been just as good. We had no idea we were going to get into what we have.”

He said that if the possibility of a Bitcoin mine had been mentioned, “we would have looked into it and we would have known what was coming.”

Instead, the close-knit community still finds itself in limbo, unsure whether the mine will eventually move as a result of a final settlement agreement — likely prompting opposition in Telford, where the new one would be built — or whether the lawsuit will proceed to a jury trial.

It’s something that could take even longer to work its way through the courts, assuming GRIID remains a going concern and has the resources for a protracted legal battle.

The earliest the Washington County Commission could consider a settlement, should an agreement cross Wilkinson’s desk, would be at its October meeting.