Announcing a Return to our Roots: The All-New Bitcoin Magazine

ASIC Developer Bitmine AG Goes Bankrupt, Faces Lawsuits

by

         ASIC Developer Bitmine AG Goes Bankrupt, Faces Lawsuits

Swiss ASIC miner developer Bitmine AG was officially declared bankrupt by the local court of Bellinzona, Switzerland, in May 2015. All accounts, assets and company documents have been handed over to the Swiss justice ministry and are under investigation.

In an open letter released on the official website of Bitmine AG, the company’s management claimed that Bitmine AG had tried to restructure its products and services by seeking new investments. It failed, however, to raise enough funding to continue its production of ASIC miners which led to the company’s bankruptcy.

Bitmine AG initially engaged in a contract with Innosilicon, a Chinese chip manufacturer to develop their 28nm ASIC. The company provided the manufacturer with explicit instructions, process of creating the mask, wafers and IC packaging concurrent to the one-year exclusivity agreement on the chip. However, Bitmine AG said it discovered that Innosilicon had violated the contract and sold the A1 chips itself.

Moreover, the shipment of the A1 chips was delayed for a few months, and the majority of the chips were defective plus we do not know what bitcoin mining software was used.

“Innosilicon repeatedly delivered us broken chips or 'junk grade' ones as part of the purchased (and paid for) lots, forcing us to place ever bigger and bigger orders in order to fulfill our customers’ orders and eventually draining out most of the company’s money," Bitmine said. "Out of all the ordered chips, a huge part of them were simply not working and could only be thrown away in the garbage bin.”

Bitmine also stated that the rapid increase of mining difficulty has been one of the core reasons why more than half of the customers canceled the orders.“If bitcoin was still valued at well over $1,000 like it was in the beginning of 2014, nobody would have tried to cancel his orders and we would all be rich," Bitmine AG said. "Unfortunately, the BTC value collapsed constantly since Mt.Gox’s bust, and mining difficulty exploded to values that nobody was able to predict at the time we were selling our products.”

Lawsuits Filed Against Bitmine AG

Regardless of the attempts of Bitmine AG to explain the company’s status to their furious customers, the ASIC miner developer began to face multiple lawsuits claiming defrauding since April, 2015.

Since its presale of a new product called CoinCraft Series 28nm, customers of Bitmine AG did not receive a single mining rig for at least 2-3 months. The refund requests were ignored by the company while Bitmine AG continued to launch new products.

Currently, the company is charged with multiple lawsuits and will face its customers in court this month.

Recommended

Op Ed: SEC’s Latest Declaration Creates Legal Minefield for Digital Assets

This broad, authoritative declaration is not unexpected, as, to date, the SEC has stated that all digital assets — regardless of whether they function as alt coins or utility tokens — are securities at least initially and, thus, subject to its jurisdiction.

Huhnsik Chung and Nicholas Secara

Op Ed: Cryptocurrency’s Unrealized Opportunities for U.S. Tax Professionals

Tax accountants and firms that specialize in cryptocurrency will emerge to capture and service this market. The first movers will be the ones who stand to capture the oversized profits.

David Kemmerer

Op Ed: Anatomy of the Tether Attack: Are Stablecoins Vulnerable?

Last month's attack on Tether contains a cautionary tale: Only those coins that can survive such attacks have the slightest chance of becoming the “holy grail" of stablecoins.

Henry He

Op Ed: 10 Takeaways From Recent French Guidance on Blockchain and the GDPR

The CNIL wisely points out, “Blockchain is not always the best technology for all processing of data; it may be the source of difficulties for the controller with respect to its GDPR obligations.”

Laura Jehl