Compass Mining asked to return $1.75 million for equipment located in Russia

On January 17, clients of Texas-based mining company Compass Mining filed a lawsuit seeking more than $1.75 million in damages for equipment located in Russia.

The plaintiffs allege fraud, breach of contract, and negligence after ending cooperation with the Russian data-center operator BitRiver, which housed Compass Mining’s miners at its facilities in Siberia.

Specifically, after in April 2022 the OFAC imposed sanctions on BitRiver, the Texas company did not attempt to recover the equipment, according to the complaint.

“BitRiver rejected and ignored all of our requests, as it is not the owner of the equipment. Compass Mining should have told BitRiver that they are merely intermediaries, and that the machines are paid for and belong to the plaintiffs,” the statement says.

In addition, the clients reported that Compass overstated the uptime of 95% of the machines — in reality it did not exceed 50-60%. Some claimed that they were offline for weeks.

On January 18, a district judge dismissed the clients’ suit against Compass Mining, citing several deficiencies that prevented the case from moving forward. The plaintiffs have until February 3 to file a second amended complaint.

“Failure to comply with this order will result in dismissal of the case without further notice,” the judge concluded.

Compass Mining, in comments to Decrypt, described the lawsuit documents as “false” and said they are confident that they “lack merit and contain key elements”.

Additionally, company representatives told users that the firm “cannot conduct or even facilitate any business relationship with the Russian hosting center”. However, according to the plaintiffs, OFAC sanctions “do not prohibit American legal or natural persons from winding down or withdrawing from existing investments in projects or activities in Russia”.

Experts note that Compass Mining may have some legal protection from the suit thanks to the Terms of Service Agreement.

“Upon expiration or termination of this agreement and full payment of all sums due to Compass, the client must arrange the return of their equipment at their own expense,” the document states.

If a second complaint is filed, the court will need to determine whether including such protection in the Terms of Use against unforeseen events could lead to early termination of the client agreement.

In April 2022, Compass Mining began seeking buyers in Russia for BitRiver-hosted mining devices valued at $30 million with a total capacity of 12 MW, which could not be exported from the country.

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