Litigation Bombshell: SBI Crypto Takes Down Whinstone USA Alleging Fraud, Negligence In Mining Fiasco – Rebel Platforms (NASDAQ:RIOT)
SBI Crypto Co.a subsidiary of Japan’s SBI Holdings Inc., has filed a lawsuit against Whinstone USAa data center based in Rockdale, Texas.
The lawsuit accuses Whinstone of misrepresenting its readiness to host a large-scale event Bitcoin BTC/USD mining and for causing millions of dollars in damages as a result of delays and poor conditions.
In the lawsuit, SBI Crypto has accused Whinstone of “fraud, fraudulent inducement of contract, fraud by non-disclosure, negligent bailment and breach of hosting service agreement.”
The lawsuit was filed in 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, part of which can be offered gradually [SBIC].”
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However, according to the lawsuit, Whinstone had not secured the gigawatts of electricity for its Rockdale facility and did not begin signing power contracts until “right before operations began in the summer of 2020.”
SBI Crypto also claims that Whinstone never fulfilled its promise to deliver 20,000 mining machines to the site, from a fleet of 16,200 in September 2020, down to 14,600 in April 2021.
The lawsuit further accuses Whinstone of failing to comply with industry standards and failing to inform SBI Crypto that building permits, certifications and power contracts were necessary 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 poor 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 RIOT in May 2021 for $11.8 million in common stock and $80 million in cash, has yet to respond to the lawsuit.
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