By Stan Higgins
A class action lawsuit filed against bitcoin mining hardware manufacturer CoinTerra may end with an out-of-court settlement, as both sides in the case have indicated interest in resolving the case before it moves to court. Ars Technica reported that CoinTerra sought permission from a U.S. judge in a Northern California district court last week to give it more time to arrange mediation talks.
The suit was originally launched in April by Lautaro Cline, a customer from Oakland, California, who said he received low-quality mining equipment and, as a result, suffered profit loss. Furthermore, the hardware reportedly arrived past the promised delivery date, which Cline has alleged exacerbated these problems.
The plaintiffs are seeking to name CoinTerra financially responsible for mining profit losses suffered by miners that have entered the class. This includes appropriation of CoinTerra profits for the benefit of miners, as well as compensation for prior damage.
In a statement, CoinTerra CEO Ravi Iyengar declined to comment on the case, but reiterated the company's commitment to its customers, saying:
While we do not comment on specific dealings with customers, we are committed to providing one of the fastest turn-key Bitcoin mining machines in the world. We are one of only a handful of vendors that has delivered a fully-operational product, and at an industry-leading specification. We have shipped 10,000+ machines and the vast majority of our customers are extremely satisfied with the product we delivered.
Suit alleges misrepresentation
According to the April filing, the plaintiffs accused CoinTerra of breach of contract and violation of both the Unfair Business Practices Act and the Violation of False Advertising Law. Specifically, the company is accused of lying about the processing capabilities and energy consumption rates of two of its mining products. CoinTerra allegedly misrepresented delivery dates to a number of its customers who are now part of the class. These dates include delivery times for products that were meant to compensate customers for prior delays.
The filing noted the specific hardware problems in Cline's CoinTerra product. His TerraMiner IV produced 1.6 terrahashes per second (TH/s) in mining power, compared to the 2.0 TH/s promised by the company. Further, the mining product consumed 2,100 watts, instead of the 1,200 originally advertised.
Ultimately, the file states that CoinTerra acted in bad faith to its customers, saying:
CoinTerra's conduct was injurious to consumers, offended public policy, and was unethical and unscrupulous. CoinTerra's violation of consumer protection and fair competition laws in California and other states resulted in harm to consumers.
Cline's lawyer, Edward Mullins said a private mediation date has not been set. However, he said that he hoped the process would begin soon, with a settlement struck ideally before the end of the summer.
Mounting problems for mining companies
Allegations of customer mistreatment have dogged CoinTerra for months. Customer complaints and requests for refunds resulted in a large backlog. The company later offered coupons as compensation for consumer frustrations.
CoinTerra is not the first mining hardware maker to face legal challenges this year. California-based HashFast fended off numerous legal challenges from customers and investors this year. The company fought being forced into involuntary bankruptcy in late May.
Ultimately, HashFast entered Chapter 11 bankruptcy earlier this month. In February, Butterfly Labs faced the prospect of its own class-action lawsuit. In total, nearly 300 complaints have been submitted to the Federal Trade Commission (FTC) regarding the Kansas-based company since 2012.