Riot Blockchain’s Data Center Sued For Fraud In Report Causing Serious Loss

Key Points:

• SBI Crypto has launched a complaint against Riot Blockchain’s Whinstone US data center in a Texas, US court, accusing it of “fraud.”
• Whinstone, according to SBIC, did not meet industry requirements, and the facility had repeatedly told the miner.
• Whinstone is also accused of failing to procure a gigawatt of power for its Rockdale complex, according to the company.

SBI Crypto, az crypto mining company owned by Japanese financial giant SBI Holdings, filed a lawsuit in a Texas court in the United States, accusing Riot Blockchain’s data center Whinstone US of “fraud, fraudulent inducement of contract, fraud by nondisclosure, negligent bailment, and breach of the Hosting Service Agreement.”

In late October 2019, SBI Crypto struck a collaboration arrangement with Whinstone US. The absence of paperwork that was truly necessary to enable miners to operate stopped them from conducting business in the months preceding operations beginning in June 2020.

Among other things, the SBIC claims that Whinstone US does not satisfy industry standards and that the facility habitually advises miners that construction licenses, certifications, and power contracts are not required to complete managed services agreements.

Whinstone assured the miner that it had obtained commercial access to up to one gigatonne of aggregated power that could be given to the Data Center, a portion of which could be sold to SBIC progressively.

Whinstone US, on the other hand, erroneously stated that it was ready for a large-scale mining operation, therefore, SBIC sought millions of dollars from it for delays and subpar conditions.

According to SBIC, Whinstone failed to get the gigawatt of energy required for its Rockdale project and did not begin negotiating power contracts until just before operations began in the summer of 2020.

Whinstone also failed to deliver 20,000 pieces of mining equipment to the site, lowering the fleet from 16,200 in September 2020 to 14,600 in April 2021, according to the company.

When an SBIC official toured the facility in June 2021, they discovered excessive levels of dust and corrosion build-up when they opened one of the machines in front of Whinstone co-founder and CIO Ashton Harris.

Whinstone reportedly delivered dust filters to other mining clients’ equipment but failed to do so for SBIC’s equipment, an error made more egregious for the miner by the fact that Whinstone verified with SBIC that dust filters had been put on SBIC’s equipment.

Riot Blockchain paid $11.8 million in common stock and $80 million in cash for Whinstone US in May 2021.

Riot Blockchain sued Northern Data in September last year, alleging a breach of contract and refusal to provide critical information. Northern Data has denied the allegations, and management does not anticipate this situation to detract from the company’s broader business goal.

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Harold

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