CoinDesk reports that CoinTerra has been sued for $5.4 million by C7 Data Centers for unpaid bills, breach of contract, legal costs and other damages.
C7, based in Utah, filed the suit in the Third Juridical District Court in Salt Lake City.
CoinTerra, one of several mining hardware manufacturers that have gotten into the cloud mining business in recent months, was also the subject of reports alleging default on mining contract payouts. The resumption of payouts may be contingent upon the approval of debt holders such as C7.
The suit seeks $1.4 million in unpaid debts for data center services and electricity costs. The latter were incurred by C7 at the rate of $12,000 per day through its arrangement with Rocky Mountain Power.
The bulk of the $5.4 million figure stems from monthly contract charges, which continue to accrue at a rate of $425,000 per month.
Stocks to Watch This Week – Expedia Group, IncGo to article >>
C7 alleges that it has notified CoinTerra of its unmet obligations and even attempted a remediation process before the matter was taken to court.
They also said that CoinTerra fell behind on its payments immediately after entering into contract, paying less than the amounts invoiced, despite information indicating that CoinTerra had sufficient revenues.
CoinTerra has yet to comment on the matter.
The action further underscores how risky the undertaking of large-scale mining operations can become and the effects of “contagion” throughout the Bitcoin economy. Steep, unexpected price drops can render operations unprofitable in a matter of months, rendering companies insolvent and exposing suppliers and customers to counterparty risk.
Yesterday, the CEX.io mining pool informed members that it will be suspending operations because they had become unprofitable.