Class Action Lawsuit Targets Bitmain for Alleged Unauthorized Mining

November 27, 2018 / by Angel Reyes

Bitmain, the cryptocurrency mining titan, has been facing a lot of controversy lately in the wake of the Bitcoin Cash catastrophe. This time, the spotlight is fully on the company because a class action lawsuit has been filed in California.

Facing $5 million in charges, Bitmain’s U.S.- and China-based operations are accused of using customer purchased ASIC [Application-Specific Integrated Circuit] devices to mine cryptocurrency on behalf of the company. A lengthy initialization processes allegedly allows Bitmain’s device to operate at full power mode at the expense of the customer’s electricity.

The lead plaintiff, Los Angeles County resident Gor Gevorkyan, said he purchased Bitmain ASIC devices, including the popular AntMiner S9, in January of this year to mine Bitcoin. He had trouble configuring the devices, and it became a lengthy process, sometimes taking days. It became clear that the machines were mining but not for Gevorkyan, and this subverted use of the miners continued until a personal account was linked to the devices.

The suit asks for “full restitution of all expenses incurred as a result of Bitmain’s unfair and deceptive practices” and for Bitmain to “cease the acts of unfair competition.” The $5 million are not including fees and interests from activities which may further incease the amount owed should Gevorkyan prevail.

According to Coindesk, Bitmain has responded to question via email saying, “Bitmain does not mine with customers’ equipment and, considering that mining for itself is a small part of Bitmain’s business, it has less incentive to do so compared to shipping the equipment as soon as possible to fulfill any confirmed orders.”

Following a recent Initial Public Offering (IPO) filing in Hong Kong with hopes to raise $3 billion to $18 billion, the suit has potential to slow operations for Bitmain.

Bitmain was reported to hold nearly $1 billion in Bitcoin Cash, and the recent price crash will further affect the company’s balance sheet. Given the accusations of price manipulation before the fork, Bitmain is likely facing further legal action.