On November 19, 2018, in the courts of North District California, Bitmain the who’s who in the crypto mining industry was alleged for mining cryptocurrency at its clients’ cost for its own benefits. The allegation entails a $5 million-dollar lawsuit for Bitmain.
The allegation was based on the company gaining benefits from the lengthy ‘initialization’ period that its ASIC (Application Specific Integrated Circuit) devices take up for their set up process. The allegation is made against the Bitmain’s U.S. and Bitmain’s China entities.
In January 2018, Gor Gevorkyan purchased Bitmain devices which included Bitamain’s S9 Antminermachine. As reported in the Gevorkyan’s case, the product was ‘difficult to configure.’ During the lengthy configuration time, the configuration process lapsed several times before he could fully initialize his device. The machine operated at cost intensive ‘full power mode’ at the client’s expense.
Therefore, Bitmain has been alleged for ‘An Unfair Business Practice.’ The accusations put Bitmain into the ‘unjustly enriching’ the firm by stealthily using its client’s ASIC devices and their personal electricity which lead to the creation of ‘ascertainable and out of pocket losses.’
Gor Gevorkyan expects damages in excess of $5 million on behalf of all the miners who are Bitmain’s clients and have faced similar issues of breach of trust like him.
The lawsuit will prove to be heavy for Bitmain’s China entity in comparison to Bitmain’s U.S. entity. Because as per Bitamain’s pre-Initial Public Offering (IPO) prospects, foreign sales accounted for 51.8 percent of the total revenue in the year 2017. Bitmain’s IPO targets to get a raise from #3 Billion to $18 Billion. But this lawsuit has bogged down the mining giant.
The embroil continues with the dipping of the Bitcoin Cash (BCH). It could mean some deep losses for Bitmain since it has invested a big amount of its funds in the asset. The controversy around the pre-Initial Public Offering (IPO) has made the alleged participants such as SoftBank, Temasek, and the Chinese IT giants such as WeChat, Tencent to deny any participation on record.