An American citizen is suing Chinese cryptocurrency mining corporation Bitmain over a sneaky mining trick.
Specifically, Gor Gevorkyan of Los Angeles claims that Bitmain has deliberately formatted its mining machines to siphon money back to itself during their initial setup process, which can take a significant amount of time.
A Sneaky Trick
Gevorkyan has filed a class action lawsuit in California. Bitmain is based in Beijing, but the US court has jurisdiction because Gevorkyan is seeking more than $5 million and there are more than 100 plaintiffs – in fact, the plaintiff alleges that the problem affects more than one hundred thousand people in the US, according to the court document.
He purchased some mining machines, including an Antminer S9, in January 2018. Gevorkyan claims that it took him “a significant amount of time” to configure the devices, during which time they were operational and generating money for Bitmain.
The document says that ASIC devices can take between a few hours and several days to set up, so the amount generated by Bitmain in this way is significant. Furthermore, this wasn’t always the case: “In the past, Bitmain ASIC devices could be configured and initialized in low-power mode that did not mine crypto currency for Bitmain. However…Defendant redesigned its ASIC devices…Bitmain cashes in on every second it takes to get the ASIC configured with the customers’ specifications…” reads the complaint.
The plaintiff alleges that until around two years ago, the devices would not mine cryptocurrency until they were linked to the owner’s account of choice. However, now, the machine will immediately start operating on full power, and send the money thus generated to Antpool by default. Antpool is a mining pool run by Bitmain, and it accounts for a significant percentage of the world’s hash power.
KVB PRIME Strikes UK with Influential Finance Summit SponsorshipGo to article >>
As correctly mentioned in the court document, Bitmain is not only the world’s foremost producer and retailer of mining devices, but is also a competitor of those that buy them, because it also mines cryptocurrency itself. Because of its size and international reach, it is able to maintain massive facilities in locations where electricity is cheap.
The case lists Bitmain Inc. as being a “Delaware corporation with its principal place of business [in] Palo Alto, California…” Bitmain Inc. is a subsidiary of Bitmain Technologies of Beijing.
Gevorkyan is seeking generous compensation and for Bitmain to stop cease this activity.
The Future is Cloudy
Bitmain generates billions of dollars and plans to go public in Hong Kong in the near future. However, not all is well in paradise.
Cryptocurrency mining is designed to become an increasingly less profitable activity, and some would argue that it is not viable as a long-term business. Add to this new competition popping up everywhere and a developing trade war with the US, and the future becomes less rosy.
The recent market crash is also a cause for concern for the company. Bitmain used to focus on generating Bitcoin, but it became more interested in Bitcoin Cash earlier this year. That coin recently split in two, causing the value of whole to collapse. The development teams behind the two new versions of Bitcoin Cash have been fighting; Bitmain CEO Jihan Wu has chosen his side and recently threatened to take a punitive action that could harm the market even more.