Compass in hot water
Compass Mining, a Bitcoin mining service provider, is facing a lawsuit from its customers for $2 million. The customers have accused Compass of fraud, breach of contract, and negligence following the company’s ending of its partnership with BitRiver, a Switzerland-based business with operations in Russia.
The customers claim that Compass failed to retrieve and return their mining machines after the U.S. Treasury’s Office of Foreign Asset imposed sanctions on BitRiver. The lawsuit alleges that the mining equipment and services in question total more than $1.75 million.
Compass Mining has denied the accusations and stated that it is investigating the matter. The company has called the filing “spurious” and believes that it “has no merit and is missing key elements.” The case has been dismissed without prejudice by a U.S. District Judge, who has given the plaintiffs until February 3 to file a second amended complaint.
The lawsuit brings to light the complex relationship between Compass and BitRiver. The two companies had a partnership in which BitRiver hosted Compass’ mining machines at its facilities in Siberia. However, on April 20, 2022, OFAC imposed sanctions on BitRiver, putting it on its Specially Designated Nationals list. The following day, Compass announced that it had cut ties with BitRiver due to these sanctions.
According to the Florida court documents, Compass representatives told users that the company “is unable to conduct, or even facilitate, any business dealings with the Russian hosting facility.” The plaintiffs allege that OFAC’s sanctions “do not prohibit U.S. entities or persons from winding down or divesting of an existing investment in a project or operation in the Russian Federation.”
Compass Mining may have some legal protection from the lawsuit due to its Terms of Service agreement, which states that upon the termination of the agreement, the customer shall arrange for the return of their mining equipment at their own expense.
The lawsuit highlights the potential risks and challenges of investing in Bitcoin mining and the importance of carefully reviewing a company’s terms of service and understanding the potential political and regulatory risks involved. It also highlights the need for transparency and clear communication from companies regarding their partnerships and operations.