SBI Crypto sues data center in Texas for fraud
SBI Crypto (SBIC), the block reward mining arm of Japanese financial giant SBI Holdings (NASDAQ: SBHGF ), has filed a lawsuit against Whinstone US, a US data center operator, for negligence, deception and fraud.
In the lawsuit filed in the Western District of Texas, the miner alleged that Whinstone misled it into believing that the data center had the necessary power contracts and building permits. It then concealed the poor conditions at its Texas facilities.
“The lack of permits and power contracts delayed the ramp-up of SBIC’s mining operations and resulted in millions in SBIC’s lost revenue. Whinstone’s failure to provide a data center environment consistent with the parties’ agreement and basic industry standards directly led to the underperformance of SBIC’s mining operations and damage to SBIC’s mining equipment,” it alleged the miner in the lawsuit.
Whinstone is owned by Riot Platforms (NASDAQ: RIOT ), formerly known as Riot Blockchain, and operates data centers in the United States for block reward miners.
Whinstone first agreed with SBIC to host 20,000 mining rigs in Texas in July 2019, but the deal fell through. Whinstone allegedly made several false representations about the host capacity and operating conditions to lure back the miner, culminating in a new deal three months later.
“In sum, Whinstone’s deceptive acts and omissions caused SBIC to lose millions in lost profits and millions more in damaged mining equipment,” the miner says.
The area at the center of the legal battle is in Rockdale, Texas. According to court documents, Whinstone claimed to have secured 1GW of electricity for the site, part of which would be offered to SBIC. This was a lie at the time the contract was signed, and Whinstone only secured the power months later in 2020.
While the agreement covered 20,000 mining machines, not all of the machines were functional at any point during the duration of the contract. They peaked at 16,200 in September 2020 but declined soon after, SBIC claims.
“Whinstone caused SBI Crypto to lose millions in both lost mining profits and damage to their mining equipment,” an SBIC spokesperson told an outlet.
“Accordingly, SBI Crypto looks forward to presenting this evidence to a jury and obtaining an appropriate remedy.”
The Rockdale data center has been in the news in the past, with Riot Platforms announcing last August that it was shutting down the site for a month as power demand in the state increased. For shutting down the miners and returning over 11,000 megawatt hours to state grid operator ERCOT, Riot earned $9.5 million.
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