CoinTerra in Trouble as Lawsuits Emerge
CoinTerra's business has been frozen because of multiple lawsuits filed against it. The hardware and cloud mining company says they are waiting for the courts to decide whether it will continue trading.
Like many bitcoin companies, CoinTerra has had to deal with a volatile exchange rate and high demand, a combination which means delays are disastrous. Its main issue is that it’s being sued by C7 Data Centers for $1.4 million, after C7 claimed CoinTerra stopped paying its bills “almost immediately”. CoinTerra moved in to C7 in order to run its cloud mining service, and has been operational there since April 2014.
On top of the basic backpayment, C7 wants an additional $4 million for costs and other services, like the $12,000 per day electricity bill. As a result of these mounting debts, CoinTerra has had to file for restructuring to try to save the business in the face of a default.
Meanwhile, the company has had to disconnect its mining hardware at other data centers because it has loans secured on the miners it’s using. Essentially, all of its assets are in limbo, and mining is completely halted.
Next Steps for CoinTerra
How did things get so bad? CoinTerra says that it has fallen foul to a variety of unfortunate circumstances – a perfect storm, in the bitcoin world at least. The currency is still falling in value, dipping below $200 recently, and increased mining difficulty spells bad news for hardware vendors too.
For CoinTerra, mining has been inefficient. CEO of Cointerra, Ravi Iyengar, says that there’s actually a flaw in the mining model, since the difficulty of mining has not corrected itself as the price has gone down. Iyengar has also complained that some users are mining below profit margins – perhaps because they have access to free power – and this has caused the mining model to behave unexpectedly.
Iyengar, stated that CoinTerra is now powerless to do anything about the situation. It cannot switch the hardware back on, because it’s loan security. CoinTerra has filed a countersuit against C7 for breach of contract and ‘unjust enrichment’
Despite looming legal problems, CoinTerra was still announcing new mining hardware back in September 2014, perhaps oblivious to the problems that lay ahead. Its 16nm AIRE Miner was due to ship in Q1 2015, but could potentially be shelved indefinitely. Rumours of the company developing 16nm technology first began to circulate on Bitcointalk in the summer of 2014 and with the lengthy development process it is presumed that the chips are nearing, or already taped out. With the company facing uncertainty, will another hardware company step in and purchase their chips?
Image Courtesy of Cointerra.com