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.