Chad Everett Harris, Whinstone US, RIOT sued for $50MM

Aug 17, 2022 by

Chad Everett Harris, Whinstone US, RIOT sued for $50MM

Chad Everett Harris, Ashton Harris, and Whinstone US started a bitcoin mining operation in Louisiana with a $5.8 MM initial deposit provided by GMO to cover construction cost and to provide working capital.   Whinstone made commitments to obtain the loan and failed to deliver on their commitments.  They even failed to secure a reliable source of energy.  It’s all in Exhibit 1 of the lawsuit doc.  You can download and read a PDF of the court doc below.

Some bits from the filing:

When that project fell apart, Whinstone pursued development of a data center project in Rockdale, but again failed to raise the necessary funds. To proceed with the Rockdale project, Whinstone desperately needed to secure GMO as a customer at that facility. So, as an incentive to (1) deferring payment of the millions of dollars it already owed GMO, (2) secure a contract with GMO and (3) convince GMO to loan it additional money to fund construction costs, Whinstone offered GMO favorable terms for a new colocation arrangement at the Rockdale data center.

Over the course of 2020 and into 2021, GMO pushed Whinstone to repay the amounts owed, but Whinstone engaged in a pattern of delays.

For instance, despite Whinstone’s obligation to begin operations within 20 weeks of the construction start date, see Texas Agreement at 2.1, the center did not reach 5MW operations until June 2, 2020, much later than expected. This was largely due to project mismanagement and lack of budget control resulting in significant delays in (1) the construction of the data center building, switch stations, sub-stations and electrical facilities, and (2) putting the power supply schedule in place.

all discussions came to a halt when Riot acquired Whinstone in May 2021. Indeed, the now Riot-controlled Whinstone never again made any proposal concerning its indemnity obligations and instead-only after dozens of requests over many months-proposed in bad faith a wholly unacceptable longer-term agreement with terms vastly disadvantageous to GMO.

Whinstone is liable for, inter alia, GMO’s loss of revenue, loss of profit, and loss of savings stemming from any breach. GMO’S losses attributable to these additional breaches exceed $50 million.

Whinstone also recently invoiced GMO for an increase in power price from $0.0285/kWh to $0.03/kWh … ostensibly because the power price to be paid by Whinstone to its provider, TXU Energy, is set to increase. However, the 2019 Texas Agreement provides that the power price of $0.0285 USD/kWh “shall not be increased for 10 years”.

It was written that RIOT was suspected of selling hosting at a loss or at least extremely small margins. There wasn’t a lot of info available, since the contracts were confidential, but a lot of what was written appears to be pretty close to accurate.

On or about March 29, 2022, Whinstone improperly removed certain of GMO’s mining machines in breach of its obligations under … Due to Whinstone/Riot’s removal of GMO’s machines, GMO suffered a decrease of an estimated 20 petahashes in mining capacity, which amounts to at least $16,000 a day in profits. While GMO demanded that the equipment be returned/replaced and send a formal notice related to such on April 12, 2022, it did not receive any response. And upon visiting the Rockdale data center on May 7, 2022, GMO personnel discovered that its machines had not been placed back in service but had instead been replaced by Whinstone machines operating for Whinstone’s own benefit. Despite multiple demands that the GMO machines be put back in position, Whinstone refused.

Download and read the official court document here, Whinstone_Riot_Lawsuit

Disclosure:  Digital Arteries has no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours.  The views and opinions expressed herein are the views and opinions of the authors.

Learn more about Chad Harris below —

Chad Everett Harris, Whinstone, Riot Blockchain, Northern Data AG accused of accounting fraud  Read that article here.

Chad Harris defaults on million dollar loan, click here  to learn more.  Be sure to read the court doc.  It’s a hoot,  He tries to play the victim.  The judge ain’t buying it.

Chad Everett Harris owned this business while defaulting on loans and invoices.  Click here to learn more.

Chad Everett Harris is a porn spammer?  We believe he did that while sending email like these to the people he owed money to.

Digital Arteries