Venture-Backed Bitcoin Miner Startup Can't Deliver On Time, Gets Sued

mpicpp (3454017) points out this story illustrating the problem of betting on the differential between the price of deliverable bitcoin-mining hardware and the price of bitcoin itself: Yet another Bitcoin miner manufacturer, CoinTerra, now faces legal action for not fulfilling an order when it originally promised to. CoinTerra is the third Bitcoin-related startup to face litigation for breach of contract and/or fraud in recent months. The CoinTerra lawsuit was filed in late April 2014 by an Oakland, California-based man seeking to be the lead plaintiff in a proposed class-action lawsuit. Lautaro Cline, the suit alleges, purchased a TerraMiner IV in October 2013 for delivery by January 2014. The company promised, he claims, that this miner would operate at two terahashes per second and would consume 1,200 watts of power. It did neither. However, Cline's suit also claims that CoinTerra did not deliver the miner until February 2014, and it "operated well below the speed advertised and consumed significantly more power than CoinTerra represented, causing Plaintiff to suffer significant lost profits and opportunities."

Comments

Best Lawsuit Ever.

[AuralityKev]

"Your honor, the free money generation machine the plaintiff promised me did not generate NEARLY enough free money! Now since I have you here, I'd like to sue Money Tree, Inc. whose shrubbery is also performing woefully."

Re:Best Lawsuit Ever.

[CanHasDIY]

Right.

Kinda like how if I promised to build you a fence for X dollars by Y date, and fail to meet the agreed upon pricing and schedule, well, that's your fault for trusting me, now isn't it?

Re:Best Lawsuit Ever.

[AuralityKev]

I'm not saying his case is without actual merit. I just think it's hilarious. I do doubt, however, that beyond being made whole for the purchase price that the plaintiff will be able to demonstrate any actual damages. Mining is speculation, whether it be gold or Bitcoins. You can't attach a price tag to "if only."

Re:Best Lawsuit Ever.

[Virtucon]

Is it a nice shrubbery? Not too high is it?

Re:Best Lawsuit Ever.

[sexconker]

It is speculation because the price of bitcoins jumps around massively. Gold is nowhere near as volatile as bitcoins.

It is not speculation. You can look up the difficulty and show what the man would have been able to mine had he gotten the device on time and as advertised.
The price of bitcoins doesn't matter - you order CoinTerra to pay those lost bitcoins.
CoinTerra won't have the bitcoins on hand to pay up, so lawyers will then bitch and fight over how to value those bitcoins in USD based on market rates at various times between the promised delivery date and now. It doesn't matter though - they won't have the cash to pay up either.

Why do people believe that?

[Opportunist]

It's a bit like those crystal ball con artists. Know the kind? That tells you the lotto numbers of next week?

I always wonder the same that I wonder in this case: If that actually worked, why do they tell you (or, in this case, build it for you) instead of simply using it themselves? It's not like you need to invest a lot of work or have to have intimate know-how that the maker of the item doesn't have to mine bitcoins. It's basically "pump electricity in, take hashes out". If I could build such a "miner" that produces more bitcoins than it costs in electricity, why would I be so stupid and sell it to you instead of renting a rack somewhere and let it do it for me?

Re:Why do people believe that?

[wisnoskij]

Because it is a risk. The company making the machines gets an upfront sale with a good profit margin. The risk taker is hoping that bitcoins stay above some value and hydro does not go up, and he does not spill coffee on his server, and, and, and.

Theoretically, both ventures had (could of had) a good profit margin and were worth undertaking, and the people who undertook the machine building had machine building skills and most likely more aversion to risk, while the miner had skills more suited to that and more propensity for risk.

Re:Breach of Contract

[Qzukk]

Why would anyone sell shovels? If it was profitable, they'd dig everything themselves.

Actually, the real profit is in licensing the shovels with a per-scoop fee.

Hmmm ....

[gstoddart]

I'm not sure how this is different from any major IT project I've been involved in.

Over budget, under-performing, and not nearly as good as the sales guy made it out to be. :-P

Re:How did he ever hope to make all that money bac

[ShaunC]

The real profit to be found are with the people selling these ASICs. The best analogy I've seen compares it to people selling shovels during the gold rush.

The fun part is that a lot of these miracle mining rig builders are suspected of using those new rigs themselves for awhile before finally delivering them. So it's kind of like people selling used outdated beat-up shovels during the gold rush. The scam seems to be:

• Pre-sell insanely powerful mining rigs
• Use pre-sale money to order hardware and build rigs
• Mine for a month or two with awesome rigs while delaying delivery to buyers
• !!!PROFIT!!!
• Newer, faster hardware becomes available
• Pre-sell rigs built with this month's even better hardware
• Finally ship last month's batch to the buyers
• Repeat

Just another pyramid scheme and there are still suckers falling for it.