Compass Mining

Compass Mining sued for losing Bitcoin mining machines bought by customers

The lawsuit alleges that Compass Mining didn’t disclose to Bit River that it was only the ‘middleman,’ not the owner of its customers’ machines.

Customers are suing Compass Mining for over $2 million, alleging fraud, after the company cut ties with Russian hosting company Bit River and failed to return customers’ Bitcoin machines, citing a non-applicable United States sanction as the reason.

According to a court document filed on Jan. 17, Compass Mining issued a notice in April 2022 that it has terminated its “relationships and dealings with Bit River” due to the sanctions imposed by Executive Order 14024.

It is alleged that Compass “did not offer” to return or even retrieve the assets its customers entrusted the company with, hosted at Bit River’s facilities in Russia.

However, it was stated that it is “false” that the mining machines’ return would violate Executive Order 14024, which prohibits dealings with sanctioned entities.

The court document noted that Compass has “both the right and obligation to effect the return of its customers’ miners.”

Compass representatives met customers’ concerns with hostility, saying that it is “unable to conduct or even facilitate” any business dealings with Bit River.

When its customers had no option but to contact Bit River, the Russian firm allegedly pointed them back to Compass. Bit River representatives responded to those that reached out:

“From a legal point of view, Bit River’s contract is with Compass, and all equipment is owned by Compass. Thus you must address all questions directly with Compass.”

The court document noted that Compass should have disclosed to Bit River that they were “simply the middleman” and that the machines were paid for and owned by the plaintiffs themselves.

The partnership with Bit River was originally intended to enable Compass’ customers to host their machines at Bit River’s facilities to take advantage of “enterprise-grade, low-cost and low-carbon cryptocurrency mining facilities in Russia.”

The court document further stated that Compass’ promise of its machines’ “uptime of 95%” was inaccurate, stating that it was actually “closer to 50-60%.” In some instances, miners were not online at all for weeks or months at a time.

In July 2022, Compass was the first mining firm to announce job cuts amid the ongoing crypto winter. The firm laid off 15% of its employees while top executives and staff took major pay cuts.

Complaint filed against Compass Mining for losing BTC mining machines hits snag

The lawsuit alleged that Compass Mining didn’t disclose to Bit River that it was only the “middleman,” not the owner of its customers’ machines.

A group of customers attempting to sue Compass Mining for over $2 million for failure to return their Bitcoin machines after cutting ties with a Russian hosting company, has had their case dismissed just a day after filing their complaint.

However, the judge has given the plaintiffs another two weeks to file a second amended complaint.

The original complaint stems from a partnership between Compass Mining and Bit River which was intended to allow Compass’ customers to host their machines at Bit River’s facilities to take advantage of “enterprise-grade, low-cost and low-carbon cryptocurrency mining facilities in Russia.”

In a court document filed with the United States District Court of Southern Florida on Jan. 17, the complaint stated that Compass Mining terminated its “relationships and dealings with Bit River” in April 2022 due to the sanctions imposed by Executive Order 14024 and alleges that the Bitcoin machines hosted at the Russian facility were never returned to customers.

The complaint argued an explanation that the mining machines’ return would violate Executive Order 14024 was “false” and said that Compass has “both the right and obligation to effect the return of its customers’ miners.”

The complaint then alleges that Compass was unhelpful in helping customers retrieve their stranded machines. Compass representatives told customers it is “unable to conduct or even facilitate” any business dealings with Bit River, according to the complaint.

When its customers had no option but to contact Bit River, the Russian firm allegedly passed the ball back to Compass, stating:

“From a legal point of view, Bit River’s contract is with Compass, and all equipment is owned by Compass. Thus you must address all questions directly with Compass.”

The court document noted that Compass should have told Bit River that they were “simply the middleman” and that the machines were paid for and owned by the plaintiffs themselves.

The complaint also alleges that Compass’ promise of its machines’ “uptime of 95%” was inaccurate, stating that it was actually “closer to 50-60%.” In some instances, miners were not online at all for weeks or months at a time.

In a statement to Cointelegraph, Compass Mining said it believed the filing had no merit as it was confident the filing would prove unsuccessful.

“We are investigating the matter. As of now, Compass Mining strongly believes that the filing has no merit and is missing key elements. Compass is confident that this spurious filing will not be successful,” according to a spokesperson.

Only a day after the filing was lodged, the Florida court dismissed the case with prejudice, due to “several deficiencies that prevent the Court from moving forward,” as per United States District Judge Raag Singhal.

This included the pro se litigant Jian Huang appearing on behalf of other plaintiffs, including corporate entities without the proper authorization. The complaint also failed to adequately allege the citizenship of the parties, which is essential to determine a court’s jurisdiction in matters.

The judge has allowed the plaintiffs to file an amended complaint “no later than February 3, 2023,” requiring all plaintiffs to sign the pleading and any corporate plaintiff to be represented by counsel. Should this not be rectified, the case would be dismissed without further notice, said the judge.

Update Jan. 19, 11:26 pm UTC: Added a statement from Compass Mining and information regarding the complaint’s subsequent dismissal in court.

Compass Mining to add 25,000 ASIC miners just weeks after staff cuts

The Bitcoin mining company plans to expand its fleet of mining devices, coming on the back of staff lay-offs and executive salary cuts just weeks before.

Mere weeks after announcing staff lay-offs and salary cuts, Compass Mining has unveiled expansion plans in the form of a 75 megawatt (MW) hosting partnership with Compute North for its data center in Granbury, Texas.

The announcement on Thursday comes only two weeks after the company retrenched 15% of its employees and implemented salary cuts for its top executives as a means to weather difficult market conditions.

It also follows the resignation of key executives including CEO Whit Gibbs and chief finance officer Jodie Fisher in late June, as well as losing one of its Maine-based hosting facilities after allegedly missing payments relating to utility bills and hosting fees.

Compass said the newest large-scale deployment will begin in August and continue for several months.

The expansion includes plans to deploy 25,000 application-specific integrated circuit (ASIC) miners to the existing Wolf Hollow plant site in Granbury, including a variety of next-generation Bitcoin miners.

According to Compass, the facility is state of the art and powered by a 1.1 gigawatt (GW) combined cycle natural gas-fueled plant, which uses advanced gas turbine designs and air cooling to decrease carbon emissions and water dependence.

The data center also has a fully curtailable load and can shut down at a moment’s notice should the draw on the grid exceed capacity.

This adds to existing Compass facilities across the United States, Canada and Iceland, with major operations in Texas, Ontario, New Mexico and Florida.

Crypto miners in Texas, however, have had a difficult month as a result of a record-breaking heatwave in the state, which has caused a strain on the energy grid.

Major Bitcoin miners have been working with the Electric Reliability Council of Texas (ERCOT) by temporarily shutting down or severely reducing their operations in the state to reduce the toll on the grid.

Crypto mining firms are still coming to Texas in droves though, attracted by less regulatory oversight and lower energy costs.

Mining stocks hit one-month high

Despite the recent heatwave impacting local mining operations, publicly listed mining stocks appear to be performing well, according to NASDAQ data.

Three of the biggest miners by market cap are all in the green as of Friday.

Marathon Digital Holdings Inc has seen a 99.85% increase in its stock price over the past month, while Riot Blockchain Inc is up 65.65% and Canaan Inc is up 42.27% over the past month.

It comes as the price of Bitcoin (BTC) has also reached a one-month high, reaching $22,938 at the time of writing.

Compass Mining retrenches 15% of staff, execs to take major pay-cuts

Compass Mining parts ways with 15% of its workforce while senior employees and executives take major pay-cuts in the wake of the cryptocurrency downturn.

Ongoing strife in the cryptocurrency space has forced Compass Mining to lay off 15% of its employees while top executives and staff take major pay-cuts.

The firm announced its decision to downscale its workforce in a bid to weather difficult market conditions, just a week after the resignation of CEO Whit Gibbs and chief finance officer Jodie Fisher.

Chief technology officer Paul Gosker and chief mining officer Thomas Heller have taken over the reins at the firm as interim co-presidents and CEOs. The duo penned a letter to staff, investors and the wider community outlining the company’s road ahead.

While 15% of the company’s workforce faces difficult layoffs, the acting CEOs also announced that senior employees and its executive team will take significant pay cuts of up to 50%. The Compass Mining website currently displays its workforce — with 78 individuals making up the current team.

Cointelegraph has reached out to the company to ascertain the exact number of staff that will leave the business.

Compass Mining began operations in January 2021 as a mining hosting service. To date, it has sold over half a billion dollars of mining equipment and currently operates more than 30,000 mining machines for its customers.

Gosker and Heller’s message highlighted a fateful pitfall of the business’s initial success, as its efforts to upscale to meet increasing demand led to the company growing too quickly:

“When we launched, we were amazed by the level of demand for our services, and as a result, we tried to address the operational, financial and technology bottlenecks faced by all growing companies by hiring more people.”

Compass is the first mining firm to announce job cuts amid the ongoing downturn across cryptocurrency markets, but it is not the only casualty in the ecosystem.

As previously reported, a host of high-profile firms are at opposite ends of the spectrum. The likes of major exchanges Binance, Ripple and Kraken are looking to bolster their workforces, while Gemini, Coinbase and Crypto.com have begun reducing their staff numbers.

A number of major mining companies have also been forced to sell off portions of their Bitcoin (BTC) holdings in response to cryptocurrency market sell-offs since June.