The Niagara Falls City Council has voted to accept a settlement agreement in its bruising legal battle with a cryptocurrency mining company operating a facility on Buffalo Avenue.
The Council voted 4-to-1 Wednesday night, with only Councilman Vincent Cauley opposed, to approve an agreement with U.S. Data Technologies Group Ltd. and U.S. Data Mining Group Inc., doing business as U.S. Bitcoin.
Approval of the deal should put the crypto-mining company on a path to obtain an operating permit under the requirements of a recently enacted ordinance that amended the city’s zoning code and placed new restrictions on high energy use industries.
The settlement requires U.S. Bitcoin to comply with a series of standards for noise reduction and other abatements. It also requires the company to pay costs of $150,000 to the city, a stark reduction of the more than $1.5 million in contempt fines that the cryptocurrency operator racked up over the course of months-long legal proceedings.
Under the terms of the settlement, the city agrees to have a temporary restraining order (TRO) and a contempt order, related to the TRO, vacated. The settlement calls for U.S. Bitcoin to withdraw any outstanding legal actions it has pending against the city.
In early March, New York State Supreme Court Justice Edward Pace signed a final order that directed U.S. Bitcoin to shutdown its Buffalo Avenue operation. That followed weeks of contentious negotiations between attorneys for the city and the crypto company over the wording of an order that would enforce a ruling by another judge that had found U.S. Bitcoin in violation of the city’s high energy use industry zoning code.
Supreme Court Justice Frank A. Sedita III had directed the U.S. Bitcoin to stop operating its facility while lawyers for the city sought a preliminary injunction to force them to comply with the new regulations governing high-energy use industries. Pace ruled on Jan. 25 that U.S. Bitcoin was deliberately operating its facility in violation of the order issued by Sedita, and found the company in contempt.
At that time, Pace also ruled that if U.S. Bitcoin continued to operate the facility, he would impose fines of $10,000 a day through Feb. 1 and then increase the fines to $25,000 a day until the cryptocurrency mining stopped. The justice imposed the fines, dating back to Dec. 9, because that was the date when Sedita first issued his temporary restraining order that directed U.S. Bitcoin to stop operating while the suit seeking the preliminary injunction worked its way through the courts.
The specific terms of the settlement include:
• Limiting noise production from the facility to no more than 65 decibels, a level both parties agree would be in compliance with the city’s new high energy usage overlay district.
• Construction of a “noise dampening wall” at the property for the “purpose of maintaining the standard of sound from its operation” as required under the city’s overlay district rules.
• Work with the city to select a “third party,” “independent monitor” who would be responsible for ensuring compliance with the city’s noise level standards.
• Submit completed applications for all “permits, variances and approvals” needed to comply with the city’s new high energy usage overlay district. The proposed deal caps U.S. Bitcoin’s costs for “any and all applications” at $100,000.
In addition to an upfront, good faith $50,000 fee, the settlement also requires U.S. Bitcoin, within 30 days of the effective date of the agreement, to pay the city a $100,000 “compliance fee” for the purpose of “demonstrating U.S. Bitcoin’s commitment to amicably resolve all disputes presently existing between the parties.”
The agreement would also require U.S. Bitcoin to reimburse the city for “attorneys’ fees and costs” tied to its enforcement action against the company. The reimbursement amount listed in the settlement is $180,000.
Speaking prior to the Council action, Bryan Maacks, who lives near the U.S. Bitcoin facility, expressed some reservations over the agreement.
“I am a victim of Bitcoin’s nuisance noise,” Maacks said. “What does quality of life mean to you? How would you feel if the comfort of your home was pulled out from under you?”
