Customers are suing Compass Mining for over $2 million in fraud after the company cut ties with Russian hosting company Bit River and failed to return customers’ bitcoin machines, citing an inapplicable US sanction on.
According to a court document filed Jan. 17, in April 2022, Compass Mining issued a notice that it had terminated its “relationship and dealings with Bit River” as a result of the sanctions imposed by Executive Order 14024.
It is alleged that Compass “did not offer” to return or even retrieve the assets entrusted to the company by its clients, which are hosted at Bit River’s facilities in Russia.
However, it was found that it was “wrong” that returning the mining equipment would violate Executive Order 14024, which prohibits doing business with sanctioned companies.
The court document noted that Compass “has both the right and the obligation to effect the return of its customers’ miners.”
Compass officials met customers’ concerns with hostility, saying they were “unable to conduct or even facilitate business with Bit River.”
When its customers had no choice but to contact Bit River, the Russian company reportedly referred them back to Compass. Bit River representatives responded to those who came forward:
“From a legal perspective, Bit River’s contract is with Compass and all equipment is owned by Compass. Therefore, you must direct any questions to Compass.”
The court document noted that Compass should have disclosed to Bit River that they were “simply the middleman” and that the machines were paid for and owned by the plaintiffs themselves.
The partnership with Bit River was originally intended to allow Compass customers to host their machines at Bit River’s facilities to take advantage of “enterprise-grade, low-cost and low-carbon cryptocurrency mining facilities in Russia.”
Related: For foreign trade only: Bank of Russia opposes free crypto investments
The court document went on to say that Compass’s promise that its machines had “95% uptime” was inaccurate and that it was actually “closer to 50-60%”. In some cases, miners were not online at all for weeks or months.
In July 2022, Compass became the first mining company to announce job cuts amid the ongoing crypto winter. The company laid off 15% of its employees, while top executives and employees took significant pay cuts.
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