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Compass Mining Charged for Loss of Customers-owned Bitcoin Mining Equipment

Compass Mining is embroiled in a lawsuit alleging nondisclosure to Bit River that it only acted in an intermediary role and lacked ownership in the customer’s mining equipment. The customers are accusing Compass Mining of perpetrating a $2 million fraud. 

The charge sheet submitted before the court alleges Compass Mining terminated ties with the Russian-based host without returning the Bitcoin mining equipment. The plaintiff alleges that Compass Mining lost the equipment by citing the reason for the non-applicable US sanctions. 

Compass Accused of Negligence 

The documents submitted to the court on January 17 allege Compass Mining conveyed April 2022 notice to terminate its business dealings with the Russian-based host Bit River citing the sanctions outlined in Executive Order 14024. 

The lawsuit indicates that Compass should have sought alternatives that would have preserved value for the customers. In particular, the customers’ attorneys detailed that Compass failed to offer to either return or retrieve the mining equipment. He added that Compass portrayed negligence in its failure to retrieve the assets that customers entrusted the firm to host within the Bit River’s facilities.

The court filings indicated that Compass gave a false reason that returning the mining equipment from Russia would violate Executive Order 14024, which banned business dealings with the sanctioned firms. Consequently, the customers argue that Compass negligently extinguished the right and obligation to retrieve the customers’ miners.

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Compass Hostility to Customers’ Inquiry 

The customers’ attorney submitted to the court decrying hostility portrayed by the Compass representatives. The defendant’s representatives cited an inability to execute business dealings with the Russian host firm. 

The customers indicated that contacting Bit River yielded negative results, as the Russian firm referred them to Compass Mining. Bit River indicated that its contract legally involved Compass in the belief it owned all mining equipment. Consequently, the Russian firm directed the customers to convey their grievances directly to Compass. 

Dishonesty to Bit River and Customers

The submissions before the court demonstrate that Compass failed to inform Bit River it was only satisfying the intermediary role and that the plaintiffs owned the mining machines. 

The motion filed before the court indicates that Compass’ partnership with the host firm intended to enable the plaintiffs to host the equipment at the Russian facilities. The hosting would benefit the customers through low-carbon, low-cost, and enterprise-grade mining facilities. 

The documents further show that Compass dishonored the business terms with its customers to ensure the equipment realized 95% uptime. The customers allege that the machine’s uptime hovered between 50% to 60% and occasionally went offline for weeks or months. 

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The lawsuit rubs salt in Compass’ wounds considering the mining firm announced a 15% layoff in July 2022. Simultaneously, it imposed massive salary cuts on the retained workforce.  


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Stephen Causby

Stephen Causby is an experienced crypto journalist who writes for Tokenhell. He is passionate for coverage in crypto news, blockchain, DeFi, and NFT.

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