Bitcoin Miner Co. Can’t Escape Class Action

A bitcoin mining hardware company will not be able to escape a class action lawsuit alleging a breach of contract because the bitcoin miners were purchased but never delivered as promised because the jurisdictional requirements were satisfied, a Pennsylvania federal judge said.

U.S. District Judge Legrome Davis wrote in his Dec. 10 ruling that he’s not dismissing the bitcoin mining class action lawsuit against Advance Mining Technology, Inc. because the plaintiffs have satisfied the jurisdictional threshold needed for the amount the plaintiffs are suing over.

The amount that the plaintiffs are trying to obtain in damages is more than $5 million that is necessary under the Class Action Fairness Act.

“Punitive damages are available for the common law fraud cause of action that plaintiffs state in the first Amended,” Judge David wrote. “Punitive damages, if awarded could meet the jurisdictional threshold of $5 million with a reasonable punitive-to-compensatory damages ratio.”

The Pennsylvania federal judge concludes that “because the punitive damages that plaintiffs seek fulfill the amount in controversy requirement in this suit . . . the jurisdictional standard has been satisfied.”

Plaintiffs Craig Lenell, Thomas Urbanek and Jared Pela filed their bitcoin miner class action lawsuit against Advanced Mining on April 2 because they purchased Advanced Mining bitcoin miners that were either never received even though they paid $6,000 to $18,000 for the machines.

“Since mid-2013, the members of the Class have paid defendants millions of dollars for Bitcoin Miners. However, defendants have failed to deliver the Bitcoin Miners to the class, and the handful of Bitcoin Miners that have been reportedly received by bona fide purchasers were delivered following undue delay,” the bitcoin miner class action lawsuit said.

“Such failures have caused the class millions of dollars in damages,” they allege.

The reason the delayed delivery is also a problem, the plaintiffs explain, is because “time is of the essence when it comes to the mining of bitcoins.”

“The longer one waits to begin the process, the more difficult it becomes to acquire new bitcoins. Accordingly, the defendants’ systematic delays in the delivery of bitcoin miners have effectively decreased their value,” they add in their Advance Mining class action lawsuit.

As time goes on, “not only does the mathematics of the bitcoin system become progressively more difficult, but bitcoin mining becomes increasingly more competitive, making the opportunity to profit from bitcoin mining more challenging and more dependent on the quality of the mining equipment,” the class action lawsuit says.

Bitcoins are a “crypto-currency” that were introduced in 2009 and are mined by computers that are used to process transactions and do the necessary mathematical calculations needed to generate a bitcoin. On April 1, a bitcoin was worth $463.00. Today, it is worth $337.51. However, the IRS declared in March that it does not consider bitcoins currency but property.

Advance Mining designs and sells bitcoin miners that the company claims is able to generate bitcoins. These bitcoin miners cost anywhere from $1,499 to $14,999.

The plaintiffs claim that even though they never received their bitcoin miners that Advance Mining won’t refund their money “or compensate class members who suffered lost opportunity as a result of delayed delivery.”

The plaintiffs are represented by Kimberly Donaldson Smith, Benjamin F. Johns and Joseph B. Kenney of Chimicles & Tikellis LLP.

The defendants are represented by Michael N. Onufrak and Primitivo J. Cruz of White and Williams LLP.

The Advance Mining Bitcoin Class Action Lawsuit is Craig Lenell et al. v. Advanced Mining Technology Inc. (a/k/a Advanced Mining Technologies Inc.) et al., Case No. 2:14-cv-01924, in the U.S. District Court for the Eastern District of Pennsylvania.