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SBI Crypto sues Texas data center for deception

SBI Crypto (SBIC), the block reward mining arm of Japanese financial services giant SBI Holdings (NASDAQ: SBHGF), has filed a lawsuit against Whinstone US, a U.S. data center operator, for negligence, deception, and fraud.

In its lawsuit filed in the Western District of Texas, the miner alleged that Whinstone misled it into believing that the data center held the requisite power contracts and building permits. It then concealed the substandard conditions at its Texas facilities.

“The lack of permits and power contracts delayed the ramp-up of SBIC mining operations and lead to millions in SBIC’s lost revenue. Whinstone’s failure to provide a data center environment in accordance with the parties’ agreement and basic industry standards directly led to underperformance of SBIC mining operations and damage to SBIC’s mining equipment,” the miner alleged in the lawsuit.

Whinstone is owned by Riot Platforms (NASDAQ: RIOT), formerly known as Riot Blockchain, and operates data centers in the U.S. for block reward miners.

Whinstone first agreed with SBIC to host 20,000 mining rigs in Texas in July 2019, but the deal fell through. Whinstone allegedly made several false representations about its hosting capacity and operating conditions to lure back the miner, culminating in a new agreement three months later.

“In sum, Whinstone’s deceptive acts and omissions caused SBIC to lose millions in lost profits and millions more in damaged mining equipment,” the miner says.

The site at the center of the legal fight is in Rockdale, Texas. As per court documents, Whinstone claimed to have secured 1GW of electricity for the site, a portion of which would be offered to SBIC. This was a lie at the time the contract was signed, and Whinstone only secured the electricity months later in 2020.

While the agreement covered 20,000 mining machines, at no time during the length of the contract were all the machines functional. They hit their peak at 16,200 in September 2020 but declined soon after, SBIC alleges.

“Whinstone caused SBI Crypto to lose millions in both lost mining profits and damage to their mining equipment,” an SBIC spokesperson told one outlet.

“Consequently, SBI Crypto looks forward to presenting this evidence to a jury and obtaining an appropriate remedy.”

The Rockdale data center has been in the news previously, with Riot Platforms announcing last August that it shut down the site for a month as electricity demand in the state surged. For switching its miners off, and returning over 11,000 megawatt hours to state grid operator ERCOT, Riot earned $9.5 million.

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