Crypto miner Whinstone US has filed a lawsuit against its private equity partners over a failed joint mining venture. The lawsuit is the latest episode in a series of conflicts that have plagued their relationship since 2020.
Legal Battle Over Mining Revenues
Whinstone US has taken legal action against three companies and their executives, accusing them of fraud, conspiracy, and securities violations. These allegations stem from the dilution of Whinstone’s revenue share in a joint venture that mines Bitcoin at the Rockdale, Texas facility. The lawsuit was filed in the Tarrant County 153rd District Court in Texas.
Formation and Fallout of the Joint Venture
The joint venture, named Rhodium, was established in 2020 between Whinstone US and Delaware-registered Imperium. Under hosting agreements, Whinstone US provided up to 130 megawatts of power at a discounted rate, while Imperium handled infrastructure at Building C of the facility.
However, Whinstone US withdrew from the joint venture within the same year. They agreed to receive “12.5% of all the underlying economics” from the mining activities in exchange for continuing to supply discounted electricity, which was valued at approximately $2 million per month.
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Allegations of Revenue Diversion
Whinstone US alleges that Imperium formed new corporate entities, sold them to investors, and diluted Whinstone’s 12.5% revenue share. Additionally, Imperium is accused of restructuring Rhodium and diverting revenue to support other business ventures.
Acquired by Riot Platforms in May 2021, Whinstone US did not specify the damages sought but mentioned they are seeking monetary relief exceeding $1 million, with the possibility of an increase after discovery.
This isn’t the first legal confrontation between the parties. In May 2023, Riot sued Rhodium in Milam County, Texas, for $26 million in unpaid hosting and service fees. In November 2023, Whinstone US issued a Notice of Termination to Rhodium, cutting off its power supply and access to the facilities. Although Rhodium initially secured a temporary injunction to prevent the termination, it was later overturned.
