Compass Mining will spend the next few weeks navigating out of cold waters after investors have dragged the company to court over fraud claims. According to the filing, the investors allege that the company perpetuated fraudulent activities worth $2 million. The issue started after news that the mining platform and But River were no longer in business. After the update, Compass Mining refused to allow users to retain possession of their miners citing several laws and restrictions in the US.
The company refused to return miners
The company initially gave an update on its affairs with Bit River in a letter in April 2022, citing the sanctions contained in the 14024 executive documents. The users claimed that after the letter was published, the company refused to return their digital assets or miners, which were being hosted at facilities in Russia that Bit River owns.
However, some claim returning the miners and assets would violate the conditions for breaking the executive order contained in the document, which could bring sanctions to the company. However, the filing mentioned that it was the mining companies’ right to ensure that the assets and miners of users were promptly returned to them.
Investors said Compass Mining lied
Compass Mining initially held a sit-down with investors, with representatives telling them they could no longer conduct business with Bit River because of the sanctions. After the meeting, the investors visited Bit River to lay out their complaints and were met with the same stiff reaction. The firm said it was legally obliged to listen to Compass Mining as the company is the only one with a signatory to the miners under its care.
The investors mentioned that Compass also refused to intimate Bit River about their middleman status in the whole process. The companies initially agreed to enable users to leverage the advantages of the facilities of Bit River in Russia to mine their digital assets.
The court document also said that the mining platform lied to its users about the uptime of the mining equipment, saying it was closer to 50% instead of the 90% that the company initially quoted. The investors also said that sometimes, the miners were offline for an entire week or months at some point. Compass Mining was the first company to feel the heat of the crypto winter last year, announcing job cuts and top earners taking a slash on their salaries.