Court Grants Order to Freeze Hashfast's Bitcoin Wallets
Published on March 29, 2014 at 12:42 GMT
UPDATE (2nd April 12:30 GMT): HashFast issued a response to the Temporary Restraining Order via its blog, claiming that the plaintiff in question has never purchased any products from the company. The plaintiff, Cypher Enterprises, has in turn denied this and posted response to the bitcointalk forums here and here. Obviously this is a matter for lawyers to negotiate and possibly a judge to decide, so CoinDesk will not be updating this page any further.
Feel free to read the backgrounds from both sides' perspectives, and remember that honesty, transparency, and open communications channels are always the best way to conduct bitcoin business.
A court in Fort Worth, Texas, has granted a temporary restraining order to freeze the bitcoin wallets of ASIC mining hardware manufacturer HashFast Technologies LLC and HashFast LLC, after a customer claimed it failed to deliver hardware on time or negotiate a refund.
The TRO was part of a wider lawsuit filed against HashFast on 27th March by Cypher Enterprises, who claim it ordered and paid HashFast for several items of bitcoin mining hardware in early October last year. The complaint says HashFast failed to meet its promised delivery date later that month, prompting Cypher Enterprises to cancel its orders.
Cypher Enterprises had paid for the majority of the orders for the 'Baby Jet' mining hardware in bitcoin but said HashFast had failed to offer or pay a refund of any kind, or even reply to the cancelation.
The complaint, which has a Background section with the question "What the heck is a Bitcoin?" also contains an attachment of 30 pages of bitcointalk forum discussion detailing the history of the story from July-August 2013. HashFast had promoted the new hardware on the forum and even invited potential customers to tour their workplace in order to promote transparency.
At the time of the order, on 1st October 2013, 1 BTC was worth around $126.
It continued that HashFast had stated on the forum that in the event a refund was necessary, it would pay in bitcoin. After failing to meet the original delivery date it promised to ship no later than 31st December, a date it also missed.
In order to be "transparent and open with [...] customers, partners, vendors, and friends", Tim Wong, chief marketing officer at HashFast, responded to the allegations in official statement on HashFast's blog:
"A plaintiff that never purchased any products from Hashfast Technologies was granted a TRO from the Tarrant County District Court, Texas. This was granted ex parte: Hashfast Technologies was not provided notice of the proceeding or given the opportunity to hear the allegations or respond to them."
He continued: "If and when Hashfast Technologies is served with any court documents in this matter, it will bring these facts to the attention to the Tarrant County District Court, and vigorously defend against this attempt at profiteering and unjust enrichment."
Wong added that further updates will be issued via the company's twitter account and blog.
Changing the game
The granting of a court order to freeze bitcoin assets of mining hardware companies who fail to deliver on time could have ramifications in an industry beset by delays as small and inexperienced participants grapple with issues related to cutting edge hardware design and production.
"Outside of the Mt. Gox bankruptcy proceedings, I'm not aware of any other Texas courts which have entered a restraining order like this," said Cypher Enterprises' lawyer, Robert Bogdanowicz.
"It speaks to the legitimacy of cryptocurrencies and a growing understanding of their value and importance to businesses."
Several mining hardware startups have struggled to deliver product anywhere near the promised time, in a field so time-critical that even a month's delay can render an expensive purchase worthless due to bitcoin's constantly increasing difficulty rate.
HashFast, which had been under threat of legal action over the delays since the beginning of this year, was founded just last year and promotes itself on its website as "an industry leader in bitcoin mining technology".
Image: Baby Jet rig via HashFast.com