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Michael Kern

Michael Kern

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Michael Kern is a newswriter and editor at Safehaven.com, Oilprice.com, and a writer at Crypto Insider. Michael has several years of experience covering cryptocurrencies, and…

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Bitmain Faces $5 Million Lawsuit

Bitmain

Bitmain is in hot water once again, facing a $5 million class action lawsuit from customers who allege the firm was using its hardware to mine crypto without customers’ knowledge.

On November 19th, plaintiffs accused the mining firm of using its devices to mine cryptocurrency for its own benefit while customers set up the product. The lawsuit names over 100 class members, and totals over $5 million, though the exact fine is still under fierce debate.

One of the complaints reads, “Until the complicated and time-consuming initialization procedures are completed, Bitmain’s ASIC [Application-Specific Integrated Circuit] devices are preconfigured to use its customers’ electricity to generate crypto currency for the benefit of Bitmain rather than its customers.”

Lead plaintiff Gor Gevorkyan notes that he had purchased a mining unit and faced significant difficulties configuring the device, and alleges that “During this time, the ASIC devices were pre-configured to mine and deliver crypto currency to Defendant. Also during this time, the ASIC devices operated at full power mode, consuming a substantial amount of electricity at Plaintiffs’ expense.

These new allegations only add to Bitmain’s troubles, however.

Bitmain Remains Resilient

From misleading financials in its pre-IPO round to reporting investors that didn’t exist, Bitmain was hit with a whirlwind of bad press back in August, though the company has made drastic moves to clean up its act.

Since the pre-IPO meltdown, Bitmain has underwent a boardroom shakeup, opened up shop in Washington State and even released a new top-of-the-line mining unit, all in the face of plummeting bitcoin prices.

Despite this, however, the new lawsuit and collapsing bitcoin sentiment is still weighing on the company’s bottom line. Related: Regulatory Pressure Spooks Crypto Markets

After losing a reported $700 million in the second-quarter of 2018, many speculated that the company’s Q3 financials would be even worse. And Q4 results are likely to follow, thanks to the collapse of the crypto market.

Decreased Demand

According to Mao Shixing of F2 Pool, the world’s third largest mining pool, between 600,000 and 800,000 miners have halted operations in the past several weeks due to a lack of profitability.

“It’s hard to calculate a precise number of miners connected to us that had unplugged. But we saw over tens of thousands of them [shut down] in the past several days based on conversations we had with larger farms that we are in regular contact with,” he explained, adding, “This is what’s happening among miners in China.”

These estimates reflect data from blockchain.info, which measures a number of statistics from the world’s largest blockchain. Since early November, the network’s hashrate has fallen from 52 million tera hashes per second to approximately 41 million TH/s.

Not all is lost for miners looking to stay in the game, however. Thanks to Bitcoin’s dynamic difficulty adjustments, things make be looking up sooner rather than later.

Shixing explained, “The change of bitcoin’s mining difficulty normally has a lag of about 14 days [following hashrate change]. After this wave of shutdowns, those players who opted to stay in may have a better life.”

By Michael Kern via Crypto Insider 

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