UPDATE (16th October 12:43 BST): New background information about Butterfly Labs and Alpha Technologies has been added to this article.
A potential class action against bitcoin mining firm KnCMiner is beginning to take shape.
California-based attorney Charlotte C Lin has announced that her firm is investigating unlawful activities related to the sale and distribution of KnCMiner’s Titan and Neptune mining products. These include breach of contract, false advertisement and public misrepresentation, which were detailed on the initiative’s official website.
KnCMiner, which raised $14m in Series A funding last month, has faced complaints from customers regarding late shipments, defective hardware and other business practices in the past.
Lin’s firm specializes in areas of personal law such as employment and immigration, and in recent months has become more directly involved in the digital currency industry. Her law firm also accepts payments in bitcoin, litecoin and dogecoin.
Lin released a press statement to CoinDesk saying that the move stemmed from what she characterized as a growing chorus of dissatisfied miners.
She explained:
“I myself have a lot of colleagues and friends who are actively engaged in mining, trading cryptocurrencies, or own mining equipment. I have heard many complaints from them about not getting refunds back, equipment not working, or under-delivering hashing power.”
Her office added that it is still determining what, if any, damages will be sought as a result of the possible class action.
Notably, Lin appeared recently at the Hashers United conference in Las Vegas where miners discussed the potential suit and, in some cases, pledged their support to the effort.
KnCMiner responds
KnCMiner director of marketing and public relations Nanok Bie confirmed with CoinDesk that the company is aware of the potential class suit taking shape.
Bie stated that the bitcoin mining industry, and the ecosystem as a whole, is “a high-pressure business with a lot of strong feelings”, but argued that the class action being explored by Lin’s office will not succeed.
“There is no basis for legal action,” Bie said, later adding, “There’s a lot of these things happening in the business. We are, on the contrary, a transparent and honest company. We show journalists around our facilities, and our final accounts are public.”
For now, no actual legal measures have been taken, and as Lin’s office noted in its press statement, it is reaching out to customers and building out its case. Though short on specifics, the statement said that more updates on its case against KnCMiner are pending on the potential suit’s official website.
Industry complaints
In a highly-competitive industry prone to design issues, missed deadlines and squeezed margins, customer complaints are common.
Alpha Technology, a rival scrypt mining outfit based in the UK, has attracted criticism from consumers for its conditional refunds policy, though plans for a civil action have fallen through. Managing director Mohammed Akram has denied any wrongdoing, stating: “This refund policy is fair as we are not taking 100% [of customer deposits] upfront.”
One of the oldest hardware companies in the space, Butterfly Labs, is currently battling to resume full business operations following an enforced shutdown by the Federal Trade Commission (FTC) last month.
The FTC said it received nearly 300 customer complaints against the company, again related to refunds, shipping delays and false advertising. Butterfly Labs, which is now overseen by a court-appointed receiver, responded that it intends to address “a number of unsubstantiated claims” in due course.
Image via Shutterstock
This article was co-authored by Grace Caffyn.