Coinmint Sues California Chipmaker for $23M, Alleging ‘Elaborate Deception’
New York crypto miner Coinmint alleged two semiconductor companies set up an “elaborate deception” to lure the miner into a $150 million purchase agreement, in a lawsuit seeking over $23 million in damages.
Coinmint alleged that bitcoin technology firm Katena Computing and semiconductor designer company DX Corr set up a scheme to convince it to buy up to $150 million of bitcoin mining machines that Katena couldn’t and didn’t plan to deliver on, according to a lawsuit filed with a court in California’s Santa Clara County Superior Court on Jan. 26.
Under the scheme, Katena “improperly influenced, bribed or incentivized co-conspirators,” including one unnamed person within the mining firm, for a $150 million purchase of bitcoin mining machines, Coinmint alleged.
The lawsuit alleges fraud, breach of contract and fiduciary duty, as well as aiding and abetting against DX Corr and its executives as well as former Coinmint employees. Coinmint is asking for “actual, compensatory and consequential damages, including but not limited to the $23 million,” that it deposited for the sale, as well as punitive and exemplary damages.
“Katena is in binding arbitration concerning Coinmint’s breach of contract and is seeking damages caused by Coinmint’s failure to pay. Katena is eager to talk openly and factually about this dispute but will honor the arbitration process and its confidentiality requirements. When we can talk more openly, we will,” said a spokesperson for Katena.
DX Corr filed a motion to dismiss the lawsuit earlier this month, saying Coinmint didn’t sufficiently bring any claims to support its allegations against the semiconductor firm.
Coinmint is no stranger to litigation. Its two cofounders fought over the firm's ownership. Coinmint filed a complaint with the New York Public Service Commission against the utility of Plattsburgh, where it operates, to avoid paying a deposit related to its electricity use. It was also involved in a tax fraud case in Puerto Rico, where it is headquartered, that was settled under a confidentiality agreement, said a source close to the matter.
Coinmint denied the existence of the alleged tax fraud case and declined to comment on this story.
Court records show the municipality of San Juan sued Coinmint in March 2022, and a judge known for their tax expertise was assigned to the case. The court did not respond to CoinDesk’s request for the complaint at the time of publication.
DX Corr did not respond to CoinDesk’s request for comment.
Back in 2021, an unnamed Coinmint employee initiated conversations over the purchase of equipment. “Katena engaged in an elaborate deception” to get Coinmint’s founder and CEO Ashton Soniat on board with [claims] that it ‘truly possessed a revolutionary chip design that would disrupt the Bitcoin mining world,’” the lawsuit said.
The unnamed individual was the Coinmint chief financial officer at the time. According to a filing with the U.S. Securities and Exchange Commission and a LinkedIn, a person named Michael Maloney was Coinmint’s CFO at the time. Maloney declined CoinDesk’s request for comment through LinkedIn.
Katena was dangling an offer for the position of CFO and equity as part of the plot to Maloney, said the lawsuit.
The then-CFO asked Katena to recommend a semiconductor expert to perform due diligence on the machines. But Katena suggested Robert Bleck as an independent observer, even though he was in fact in collusion with DX Corr executive and Katena minority shareholder Sagar Reddy, Coinmint alleged. Bleck was Reddy’s “b***h,” the lawsuit read.
Bleck misrepresented Katena’s semiconductor design and production capabilities to the Coinmint CFO, who then tried to convince CEO Soniat.
Soniat signed a sales contract in May 2021 which “obliged Coinmint to pay Katena $150 million for miners without security or customary protection” according to Katena.
Katena also used the contract to try to get funding from investors, including investment bank JP Morgan, said the lawsuit.
When the CFO left Coinmint, two other individuals took the role of convincing Soniat to continue sending deposit payments. The two were also planning a hostile takeover of Coinmint and eventually parted ways with the miner.
Coinmint ultimately sent deposit payments of $23.4 million to Katena with no contractual protections and allegedly received nothing.