Bitmain’s lawsuit against former business partners comes to an end

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China-based digital currency processing equipment manufacturer Bitmain finally has a reason to celebrate. Among a failed IPO, in-fighting at the highest levels and employee layoffs, the company has been handed a victory in a lawsuit it launched against a transaction processing pool it previously owned. Poolin, the second-largest BTC pool, will now have to hand over more almost $300,000 to settle the lawsuit.

Bitmain filed a lawsuit in 2018 against three former company executives, Pan Zhibiao, Fa Zhu and Tianzhao Li, who had branched off and started their own transaction processing operation—the same three that helped Bitmain create digital currency mining operations BTC.com and Antpool. That endeavor, asserted the Bitmain, was in violation of a standing non-compete agreement and Poolin was placed squarely in the cross-hairs of Bitmain CEO Jihan Wu’s legal rifle. He sought restitution for the breach of contract and took his grievance to China’s court system. 

The verdict (in Chinese) came back this past January, but wasn’t made public until last week. The People’s Court of Beijing Haidian District determined that Bitmain was correct, and that the non-compete agreement would have contractually remained in effect until August 9, 2019. It ordered Poolin to pay Bitmain $123,000 in compensation, as well as an additional $173,000 in fines for breaking the contract. 

While it was a victory for Bitmain, it certainly was nowhere near what the company had hoped to get out of the lawsuit. It had initially tried to receive a judgment of $4.3 million, which it reached by considering a fine of $667,000 for the contract breach and the handling fees from the 26,825 BTC Poolin had mined since launching operations. The court, however, decided that the amount was excessive, even though, by law, Bitmain could have been entitled to the handling fees. 

The judge in the case explained, “If the ‘Confidentiality, Non-compete and Intellectual Property Rights Agreement’ stipulates that the losses caused to Party A [Bitmain] and Party A’s affiliated companies are higher than the amount of liquidated damages, Party B [the defendants] shall also bear compensation for all the losses already paid to Party A and Party A’s affiliated companies… Now that the court has determined that Pan Zhibiao paid liquidated damages to Bitmain, but Bitmain did not provide evidence to prove that the company suffered more losses than the liquidated damages, this court does not support Bitmain’s lawsuit requesting Pan Zhibiao to provide compensation for the losses.”

This was a minor victory for Bitmain, as the proceeds won’t go far after all court-related costs are covered. However, with the lawsuit now firmly in the rear-view mirror, the controversial company can get back to more important matters, such as how to settle a dispute with co-founder and former executive Micree Zhan. It will also be able to dedicate some time, perhaps, into figuring out how to make its mining rigs work properly.