Customer Accuses Bitcoin Mining Firm Blockware of Fraud

A customer sued Blockware Solutions, the hosting provider, for Bitcoin mining equipment and fraud. The case was filed in U.S. Federal Court in the Northern District of Illinois on Dec. 17 and centered on an allegation that Blockware sold Faes & Co. 50 mine rigs for $525,000.

Faes claimed in the lawsuit that “Blockware did not actually own or operate a facility to host the miners and was not capable of doing so reliably.” Also, the facilities held by third parties that Blockware could tap didn’t have reliable power, resulting in subpar service, according to the suit.

Faes claimed that “As a result, Faes’ miners under Blockware’s management and control have experienced prolonged downtime and inoperability due to lack of power, resulting in significant loss of revenue.” Faes claimed it had suffered damages of at least $250,000.

Faes, a London-based company, ordered the machines to arrive at Blockware’s facilities and be hosted there in January. This was during a bull market when bitcoin mining was extremely profitable.

Faes stated that the rigs were only online since April. Faes stated that machines had an average of 70% uptime as of October instead of the advertised 100%.

According to Faes, operational issues began as soon as machines went online. They eventually became “nonoperational” in October.

Blockware claimed 100% uptime for 90 days before the machines were taken offline. According to the lawsuit, this included a Pennsylvania facility where Faes’ rigs were found, which were often not functioning.

“We disagree with all statements and claims made by Christan Faes. He attempted to coerce us to settle with him, and we believe we owe him $0. In fact, we will be countersuing him for defamation among other stipulations. We had a signed [nondisclosure agreement] on file. We have a very strong case, his filing has baseless/false claims and after filing he still offered to drop the case if we settled (once again coercion). We believe the main reason for his filing was the value of his rigs dropped in price and he has harassed us with personal threats weekly via text/other communications until filing this lawsuit. We are confident it will be tossed out from the court, we have honestly served this industry for over 5.5 years and this has been first filed lawsuit against us.”

Blockware CEO Mason Jappa

Blockware is the least-known retail-facing mining company accused of operating problems in 2018.

Compass Mining’s CEO and chief financial officer resigned in July after a series of “setbacks” and disappointments, including delays in machine deployment and the stranding of several thousand rigs in Russia due to sanctions against its host country.

Compute North and Core Scientific, two major industrial-scale miners, have been forced to file for bankruptcy, caught between high energy prices and low bitcoin prices.

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