Coinmint Sues California Chipmaker for $23 Million, Alleging ‘Elaborate Hoax’

New York crypto miner Coinmint has alleged that two semiconductor companies set up an “elaborate hoax” to lure the miner into a $150 million purchase deal, in a lawsuit seeking more than $23 million in damages.

Coinmint alleged that bitcoin technology company Katena Computing and semiconductor design firm DX Corr set up a scheme to convince it to buy up to $150 million worth of bitcoin mining machines that Katena could not and did not plan to deliver, according to a lawsuit filed. with a court in California’s Santa Clara County Superior Court on January 26.

According to the scheme, Katena “improperly influenced, bribed, or incentivized co-conspirators,” including an unidentified person within the mining company, for a $150 million purchase of bitcoin mining machines, Coinmint alleged.

The lawsuit alleges fraud, breach of contract, and fiduciary duty, as well as aiding and abetting against DX Corr and its executives, as well as former Coinmint employees. Coinmint is seeking “actual, compensatory, and consequential damages, including, but not limited to, the $23 million” it deposited for the sale, as well as punitive and exemplary damages.

“Katena is in binding arbitration regarding Coinmint’s breach of contract and is seeking damages caused by Coinmint’s non-payment. Katena is eager to speak openly and objectively about this dispute, but she will respect the arbitration process and its confidentiality requirements. When we can speak more openly, we will,” a Katena spokesperson said.

DX Corr filed a motion to dismiss the lawsuit earlier this month, saying that Coinmint did not file enough claims to support its allegations against the semiconductor company.

Coinmint is no stranger to litigation. Its two co-founders fought over ownership of the company. Coinmint filed a complaint with the New York Public Utilities Commission against the Plattsburgh utility company, where it operates, to avoid paying a deposit related to its electricity usage. It was also involved in a tax fraud case in Puerto Rico, where it is based, that was resolved under a confidentiality agreement, a source close to the matter said.

Coinmint denied the existence of the alleged tax fraud case and declined to comment on this story.

Court records show that the municipality of San Juan sued Coinmint in March 2022, and a judge known for his prosecutorial expertise was assigned to the case. The court did not respond to CoinDesk’s request for complaint at press time.

DX Corr did not respond to CoinDesk’s request for comment.

In 2021, an anonymous Coinmint employee started talks about buying equipment. “Katena engaged in an elaborate hoax” to get Coinmint founder and CEO Ashton Soniat to join [claims] that he ‘actually possessed a revolutionary chip design that would disrupt the world of Bitcoin mining,’” the lawsuit states.

The unidentified person was Coinmint’s chief financial officer at the time. According to a filing with the US Securities and Exchange Commission and LinkedIn, a person named Michael Maloney was Coinmint’s chief financial officer at the time. Maloney declined CoinDesk’s request for comment via LinkedIn.

Katena was submitting an offer for the chief financial and capital position as part of the Maloney scheme, the lawsuit says.

The then CFO asked Katena to recommend a semiconductor expert to perform due diligence on the machines. But Katena suggested Robert Bleck as an independent observer, despite the fact that he was in cahoots with DX Corr executive and Katena’s minority shareholder Sagar Reddy, Coinmint alleged. Bleck was Reddy’s “bitch,” the lawsuit said.

Bleck misrepresented Katena’s semiconductor design and production capabilities to Coinmint’s CFO, who then tried to convince CEO Soniat.

Soniat signed a sales contract in May 2021 that “forced Coinmint to pay Katena $150 million for miners without security or customary protection,” according to Katena.

Katena also used the contract to try to obtain financing from investors, including investment bank JP Morgan, the lawsuit says.

When the CFO left Coinmint, two other people took on the role of convincing Soniat to continue sending deposit payments. The two were also planning a hostile takeover of Coinmint and eventually parted ways with the miner.

Coinmint ultimately sent deposit payments of $23.4 million to Katena without contractual protections and reportedly received nothing.