Fraud Allegations Haunt Former CEO of HashingSpace

A new entrant in the US bitcoin mining ecosystem is facing an uncertain future after key executives depart amid federal litigation.

AccessTimeIconSep 25, 2015 at 12:31 p.m. UTC
Updated Sep 11, 2021 at 11:53 a.m. UTC

HashingSpace, a US-based bitcoin mining firm, is facing an uncertain future following the resignation of key executives amid allegations of fraud tied to a past business venture.

The company was previously led by Timothy Roberts, a serial entrepreneur whose history dates back to the late 1990s. His first company, Savvis, was an early entrant in the managed hosting market and counted Apple among its early customers. In 2011, Savvis was sold to telecom giant CenturyLink for a reported $2.5bn.

Subsequent ventures would prove to be more troubled, eliciting federal scrutiny on two separate occasions.

Among those early businesses was Intira, a web services business launched in 1998 that drew attention for the hundreds of millions of dollars it raised from investors over a three-year period. The firm filed for bankruptcy in July 2001.

This was followed by Broadband Investment Group, a venture capital firm founded in 1999. The firm filed for bankruptcy in 2001, according to the St. Louis Business Journal.

In 2002, Roberts founded Infinium Labs, a video game hardware and software venture that became infamous in gaming circles for its failure to deliver its promised Phantom console and content streaming service. The firm later released a line of wireless keyboards.

In 2006, the US Securities and Exchange Commission filed suit against Roberts, who served as Infinium's CEO, over alleged stock promotion fraud and unreported stock sales by Roberts.

The SEC said at the time that Roberts ordered the issuance of faxes that misrepresented the development of the Phantom console and predicted a 3,000% increase in the price of the firm's stock.

Roberts settled with the agency in 2008 without admitting any wrongdoing. He was ordered to pay $30,000 and was barred from serving as the head of a public company for five years.

Roberts’ last major venture was Savtira, a company that attracted significant attention in Florida business and media circles with its plans to launch an online e-commerce platform for merchants. The firm was founded in 2010.

In April 2012 Savtira filed for Chapter 11 bankruptcy, only to be forced into Chapter 7 in July of that year. The firm declared bankruptcy amid an investigation by the Labor Department into unpaid wages and lawsuits filed by some of its vendors. At the time, Roberts blamed "greedy investors and some ex-employees" for the company's problems, according to the Tampa Bay Times.

Now, Savtira – and Roberts, who served as HashingSpace's CEO and chairman of the board – are at the center of twin legal efforts being pursued by the Justice Department and the SEC.

Federal prosecutors unsealed a six-count indictment against Roberts and HashingSpace’s former CFO, Terrance Taylor, on 9th September. The same day, the SEC filed a suit against Roberts, Taylor and Craig Constantinou, a Savtira investor, alleging that the three defrauded the now-defunct firm's investors by misrepresenting its health and valuation.

Roberts and Taylor resigned from HashingSpace on 8th September, according to a recent SEC filing.

Blockchain hosting play

In an interview conducted on 2nd September, Roberts said HashingSpace planned to use its bitcoin mining activities as a means to capitalize on the rising interest in blockchain applications, which he argued would require reliable hosting services.

“We’re going to use our bitcoin mining as a catalyst to generate revenues and profits so we can build out our blockchain enterprise hosting,” he said.

The company, in a public relations push beginning in mid-July, announced the launch of its own P2Pool mining pool and its plans to build new data center space in the state of Washington and launch a bitcoin wallet service.

Further, HashingSpace rebranded the cloud mining system of Genesis Mining, connecting customers to that firm’s mining service. It also bought a bitcoin ATM from Lamassu, under the HashingSpace banner.

HashingSpace registered as a money services business with the Financial Crimes Enforcement Network on 25th August, according to the agency’s registration database.

Roberts said that despite early stumbles – he acknowledged he and his team had run into pitfalls while building out their mining capacity – HashingSpace was on track to begin expanding its current capabilities. Roberts said at the time that the company had 100 S4 units running in three different facilities.

Once built, he said, the data center space will be used for hosting bitcoin miners, offering cloud-based contracts, as well as offering transaction verification for companies using using non-bitcoin blockchains.

Amid the company’s public relations push, the firm’s publicly traded stock – ticker name HSHS – saw a massive price swing from less than $0.25 on 5th June to more than $6 on 29th July. By 5th August, the price had fallen to its June lows, and at press time, a single share of HSHS is trading for around $0.03, according to data from Google.

When asked about the price moves, Roberts said in the interview:

“It’s a new stock and it lacks support. Having a stock is no different than selling a consumer product. You've got to get new shareholders to know about the company and support it.”

On the subject of past controversies, Roberts suggested that media reports were not entirely accurate, stating that "if you knew the story behind it, you’d have a different perspective than what you read on the Internet".

"I go to bed every day with a clean head and no guilty conscience," Roberts said. "Every business I have started has been with good intentions and unfortunately, as an entrepreneur, the odds are against you."

Fraud allegations

The resignations of Roberts and Taylor from HashingSpace were prompted by the unsealing of the charges – one count of conspiracy to commit wire fraud and five charges of wire fraud – and the restrictions, he said in an email, that the indictment would result in.

“The resignation from HashingSpace was part of this due to knowing we would be forced into pre-trial restrictions that would hamper our ability to run the company,” he said.

According to the Justice Department, Roberts and Taylor – who served as Savtira's EVP of finance – allegedly misled investors by lying about the viabiliy of its e-commerce development and the overall health of the firm.

The Justice Department said on 10th September:

“The indictment alleges that Roberts and Taylor made false claims in their marketing of Savtira to potential investors. They maintained that the company was profitable; the company had entered into executed agreements with nationally recognized legitimate technology firms; the company owned patents; and/or that the company was valued between $450 million and $540 million.”

Roberts, who according to court records was arrested and later released on $25,000 bond, said he was “blindsided” by the suit.

“We have a very defensible case and look forward to having to the opportunity to respond to these frivolous and exaggerated allegations," he said. The law firm representing Taylor, The Suarez Law Firm of Tampa, Florida, was not immediately available for comment.

The SEC's complaint, filed in the US District Court for the Middle District of Florida, alleged that Roberts and Taylor sold unregistered shares of Savtira and used a flawed investment bank valuation to pitch the company to investors. The agency also said that Roberts failed to disclose his earlier run-in with the SEC when selling the securities.

“Roberts and Taylor described Savtira, in both marketing materials and presentations to investors, as a highly-valued enterprise with patented technology and hundreds of millions of dollars in projected revenues. In reality, however, Savtira was insolvent and had minimal revenues,” the agency said in a press release earlier this month.

The SEC is seeking to bar Roberts and Taylor from serving as officers of a public company in the future, as well as federal penalties and disgorgement of any illicit gains.

The US government has also sought to prevent Roberts from selling or transfering shares in companies he has a stake in, including HashingSpace. The court previously said that Roberts was not allowed to solicit funds from investors as part of the conditions of his release.

In a 16th September court filing, defense attorney David T. Weisbrod asked that Roberts be allowed to sell or transfer shares of HashingSpace stock as well as shares in another venture, StationDigital. Roberts served as CEO of the music streaming service before resigning in June of last year. Taylor served as StationDigital's CFO before resigning last September, according to court documents.

In the request, Weisbrod said that the sale of HashingSpace shares would enable the firm "to attempt to bring in a new majority shareholder by selling the shares which Mr Roberts currently owns".

"This could be done without any input from Mr Roberts," Weisbrod wrote. He said the StationDigital shares would be gifted to family members, who may then potentially sell those shares in order to provide financial support to Roberts or loan them to him.

US Attorney A. Lee Bentley responded in an 18th September filing by asking the court to deny this request "because [Roberts'] statements about his ventures have consistently been inaccurate and the government would maintain intentionally misleading".

"No investor can safely rely on Mr Roberts to accurately represent the value of any stock for which he is involved in fundraising, which is or until recently was the case with HashingSpace and Station Digital," the filing read.

A hearing on the request will be held on 2nd October.

HashingSpace’s future

Where does this leave HashingSpace? Roberts said he couldn’t comment on how the charges against him will impact HashingSpace’s future.

“I hope for the best since a lot of hard work was put in by many," he said.

A recent SEC filing suggests the company is still moving ahead despite the resignations. According to a 17th September filing, HashingSpace has tapped a new chairman of the board.

Multiple phone calls to HashingSpace’s listed office in Los Angeles were not returned by press time, nor was an online representative available. An automated message stated that the company’s office was closed when reached over the course of this week.

The website for, HashingSpace’s cloud mining service, was also not accessible at press time.

Amid the US government's action against Roberts and Taylor, Genesis Mining has put its relationship with HashingSpace on hold.

“Until the situation with HashingSpace is fully resolved and obligations fulfilled we have put our services for them on hold. We are all waiting for more clarity in the current situation," Genesis Mining CEO Marco Streng told CoinDesk.

When asked whether customers who had purchased contracts through HashingSpace would still have access to that hashing power, Streng said this is "entirely up to HashingSpace”.

In early August, HashingSpace announced it was working with Pillsbury Winthrop Shaw Pittman LLP attorney Marco Santori. Santori declined to comment when asked whether this relationship was still active.

Representatives for architectural firm Ross & Baruzzini, contractor C. Rallo Contracting Co. Inc., law firm Kane Kessler and real estate service Newmark Cornish and Carey – firms identified through press releases as involved in HashingSpace's plans to build and operate data center space – were not available for comment when reached.

Fraud image and Washington image via Shutterstock


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