Texas Bitcoin Mine Whinstone Countersues Japan's GMO Internet, Seeks $15M Damages in Four-Year Dispute

The dispute dates back to 2018, but recent activity appears to have been triggered by increases in the cost of electricity.

AccessTimeIconAug 25, 2022 at 1:13 p.m. UTC
Updated May 11, 2023 at 5:35 p.m. UTC
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Riot Blockchain (RIOT)'s Whinstone bitcoin (BTC) mine is seeking at least $15 million in damages from Japanese tech firm GMO Internet as a dispute over usage of facilities extends into a fourth year, according to a Monday filing in the U.S. District Court for the Southern District of New York.

The lawsuit follows GMO Internet's June 10 claim, filed in New York Supreme Court, for $50 million of losses resulting from Whinstone's alleged failures in hosting GMO machines at sites in Louisiana and Texas and overcharging for power.

The dispute refers to events that started in 2018, but appears to have been exacerbated by more recent developments. The higher power costs of recent months have seen hosting companies charge more for electricity to run the machines. It's a wrangle that has already in part prompted a lawsuit between Compass Mining and Dynamics Mining.

According to GMO's complaint, the Louisiana site started running three months late and had capacity for 385 machines rather than the almost 66,700 agreed upon. The site was shut down in July 2019 because it couldn't secure enough power to operate, according to GMO.

The two agreed to build a new data center in Texas and host GMO's machines there. The Japanese firm agreed to continue giving Whinstone its business under terms that included a lower hosting fee and repayment of its original deposit along with "loss of profits from by power suspension," according to the contract provided by GMO.

Whinstone, which operates the mine in Rockdale, Texas, disputed the facts of events related to the Louisiana site and denied the allegations. The site of the facility, slated to be one of the world's largest bitcoin mines, was purchased by Riot Blockchain in 2021.

Talks to resolve a dispute over losses GMO suffered due to a "power shortage" were paused when Riot acquired the facility, according to GMO. Given the decrease in hosting fees, it looked like the Japanese company was asking for $3 million for the power shortage losses, until April this year, when it asked for $35 million, Whinstone said.

Whinstone claims it is owed damages for failure to agree on a new contract, and for power purchased for use by GMO that hasn't been used.


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Eliza Gkritsi

Eliza Gkritsi is a CoinDesk contributor focused on the intersection of crypto and AI.

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