The customer sued Kompas Mining for over $2 million, alleging fraud, after the company cut ties with the Russian hosting company Bit River and failed to return the customer’s Bitcoin machine, citing non-applied United States sanctions as the reason.
According to a court document filed on January 17, Compass Mining issued a notice in April 2022 that it had terminated “relationships and dealings with Bit River” due to the sanctions imposed by Executive Order 14024.
It is alleged that Kompas “does not offer” to return or retrieve assets entrusted by customers to the company, which are held at the Bit River facility in Russia.
However, it was said that the “fake” return of the mining machine would violate Executive Order 14024, which prohibits transactions with sanctioned entities.
Court documents note that Kompas has “the right and obligation to return the customer’s miners.”
Compass representatives met the customer’s concerns with hostility, saying they were “unable to conduct or even facilitate” business dealings with Bit River.
When customers had no choice but to contact Bit River, the Russian company allegedly turned to Kompas. Bit River representatives responded to those reached:
“From a legal point of view, Bit River’s contract is with Kompas, and all equipment belongs to Kompas. So, you should resolve all questions directly with Kompas.
Court documents noted that Compass had to tell Bit River that they were “just an intermediary” and that the machines were paid for and owned by the plaintiffs themselves.
The partnership with Bit River was originally intended to allow Kompas customers to host their machines at Bit River’s facilities to take advantage of “enterprise-grade, low-cost cryptocurrency mining facilities in Russia.”
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The court documents said Kompas’ promise of “95% uptime” of the machine was inaccurate, when in reality it was “closer to 50-60%”. In some cases, miners are not online for entire weeks or months at a time.
In July 2022, Compass was the first mining company to announce job cuts amid the ongoing crypto winter. The company laid off 15% of its employees while executives and top staff took pay cuts.