Bitcoin mining hardware manufacturer HashFast is just one hearing away from being forced into involuntary Chapter 7 bankruptcy.
The company is currently entangled in a number of disputes with customers demanding shipment of various bitcoin miners, including mining company Liquidbits.
Liquidbits is taking action over the company’s failure to fulfil a $6m order and has petitioned a San Francisco court to appoint a Chapter 7 bankruptcy trustee. As a result, the court has agreed to hold an emergency hearing today.
If the petition is granted, HashFast could be forced into involuntary bankruptcy and the trustee will proceed to liquidate the company’s assets.
In addition to Liquidbits, another group of customers has filed a similar petition, claiming that their orders, totalling $330,000, have not been fulfilled.
Ars Technica spoke to HashFast CEO Eduardo deCastro who said the company is as “poor as a church mouse”, admitting that HashFast was forced to practically empty its bank accounts in order to pay out refunds.
Prior to interview, HashFast announced that it laid off 50% of its staff, but claimed it is not headed into bankruptcy.
HashFast representative Joe Russel told CoinDesk that the company is looking to become more transparent and more effective at communicating with its customers.
In the candid talk with Ars Technica a few weeks ago, the company admitted a number of big mistakes, such as hiring an unsatisfactory printed circuit board design and having to halt sales as a result last December. DeCastro added:
“We just hired a contractor we shouldn’t have hired.”
LiquidBits pulled out of the deal because HashFast was not able to fulfil the the contract and the following shortfall in income forced the manufacturer to revise its accounts.
“Our whole financial plan was [consequently] based on how the money was going to come in,” HashFast CTO Simon Barber said.
Barber insisted the company wants to do all it can to fulfil orders and refund its customers. He said HashFast has “lots of chips on hand” and that it can deliver more hashing power than initially promised.
The companies tried to salvage the deal and renegotiated to convert LiquidBits’ order for 2,500 Sierra miners into 30,000 Golden Nonce ASICs. Liquidbits has claimed it took delivery of only 2,000 chips in April.
Liquidbits CEO Gregory Bacharach said he then “engaged in efforts” to obtain either the remaining 28,000 chips or a refund for the amount paid for the undelivered chips, adding:
“Each time I was told by HashFast personnel that HashFast was not in a position to refund the money.”
HashFast is facing similar legal challenges from Koi Systems, DigiMex and individual miners.
Furthermore Bacharach alleged that HashFast is trying to sell off remaining inventory abroad, in violation of a binding arbitration order that forbids the company from doing so. Whether that is the case remains to be seen.
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.