Bitmain Faces $5 Million Lawsuit Over Alleged Unauthorized Crypto Mining

Cryptocurrency mining giant Bitmain is facing a class action lawsuit for over $5 million that alleges unauthorized crypto mining by the firm.

On Nov. 19, lead plaintiff Los Angeles County resident Gor Gevorkyan filed the case against both Bitmain's China- and U.S.-based entities in the federal court of the Northern District of California, alleging that the firm's devices use customers’ resources to mine cryptos for its own benefit prior to full setup.

“Until the complicated and time-consuming initialization procedures are completed, Bitmain’s ASIC [Application-Specific Integrated Circuit] devices are preconfigured to use its customers’ electricity to generate crypto currency for the benefit of Bitmain rather than its customers,” reads the filed complaint seen by CoinDesk.

The document indicates there are more than 100 class members involved in the action and that the aggregate amount under debate “exceeds $5,000,000, exclusive of interest, fees, and costs.”

Gevorkyan said that he purchased Bitmain ASIC devices, including the AntMiner S9, in January of this year to mine bitcoin. However, he faced difficulties configuring the devices and it took time to install them.

"During this time, the ASIC devices were pre-configured to mine and deliver crypto currency to Defendant. Also during this time, the ASIC devices operated at full power mode, consuming a substantial amount of electricity at Plaintiffs’ expense," the complaint states.

It further adds that this “unfair business practice” by Bitmain continued until the ASIC devices were linked with Gevorkyan's personal cryptocurrency account.

As a result, Gevorkyan and the other members are seeking “full restitution of all expenses incurred as a result of Bitmain’s unfair and deceptive practices” and an order requiring Bitmain to “cease the acts of unfair competition alleged”, as well as interest at the highest rate allowable and other fees and costs.

In summary, the complaint said:

"Conveniently, Bitmain cashes in on every second it takes to get the ASIC configured with the customers’ specifications and lays the substantial costs of operating the ASIC devices at the feet of its customers."

"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," the firm said in an email to CoinDesk.

Earlier this month, Bitmain itself filed a suit against an anonymous thief in a U.S. federal court who allegedly stole 617 bitcoin from an account it holds at crypto exchange Binance.

Editor’s note: This story has been updated to include comment from Bitmain.

Gavel and bitcoin image via Shutterstock