SBI Crypto Slams Whinstone US With Fraud And Negligence Allegations In Mining Fiasco By Benzinga
Benzinga – SBI Crypto Co., a subsidiary of Japan’s SBI Holdings Inc, has filed a lawsuit against Whinstone US, a data center based in Rockdale, Texas.
The lawsuit accuses Whinstone of misrepresenting its readiness to host a large-scale Bitcoin (CRYPTO: BTC) mining operation and for causing millions of dollars in damages as a result of delays and substandard conditions.
In the lawsuit, SBI Crypto has charged Whinstone with “fraud, fraudulent inducement of contract, fraud by nondisclosure, negligent bailment, and breach of the Hosting Service Agreement.”
The lawsuit was filed with the United States District Court for the Western District of Texas, Waco Division.
SBI Crypto signed an agreement with Whinstone in October 2019, in which the latter had assured the Bitcoin miner of “secured for commercial access up to one (1) gigawatt of aggregated electricity that can be delivered to the Data Center, of which a portion of that may be incrementally offered to [SBIC].”
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However, according to the lawsuit, Whinstone had not secured the gigawatt of electricity for its Rockdale facility and did not start signing power contracts until “just before operations began in the summer of 2020.”
SBI Crypto also alleges that Whinstone never fulfilled its promise of delivering 20,000 mining machines to the site, going from a fleet of 16,200 in September 2020, down to 14,600 in April 2021.
The lawsuit further accuses Whinstone of failing to conform to industry standards and failing to inform SBI Crypto that building permits, certifications, and power contracts were required for the facility to fulfill its end of the Hosting Service Agreement.
In June 2021, a representative of SBI Crypto inspected the site and found the mining machines in substandard condition.
The machines had “high levels of dust and corrosion build-up” and were not equipped with dust filters, contrary to what Whinstone had informed SBI Crypto.
SBI Crypto is seeking millions of dollars in damages from Whinstone US for the alleged misrepresentations and substandard conditions that led to significant financial losses for the company.
Whinstone US, which was acquired by Riot Blockchain (NASDAQ: RIOT) in May 2021 for $11.8 million in common stock and $80 million in cash, has not yet responded to the lawsuit.
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© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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