A group of two dozen people (and growing) represented by Advokatfirman Rise & Co AB (Stockholm) is bringing a class action lawsuit against Swedish Bitcoin firm KnCMiner, the one-time premier manufacturer of Bitcoin mining hardware.
There is a range of issues for the court to consider, but the one CCN.com is most intimately familiar with is the one that our source, a member of this class action lawsuit, who told us about his experience with KnC. Here is a pruned (moderately edited) version of his lengthy story:
I read in the local papers that a Swedish company was going to make an ASIC. I called the number listed but thought it might be another scam. Then they delivered the Jupiter (October batch) and I was cursing my luck. That machine was awesome! I immediately got in line for the next machine, the Jupiter (November batch) and loved it, I only regretted not ordering more of them. I made my money back on that plus then some! I eventually bought 6+ more machines.
I had nothing but praise for KnC, they were from my town and they were the darling of the bitcoin industry, actually making machines and delivering on time while people like Butterfly Labs were still cheating customers.
When they announced their next batch of miners, things turned sour, and KnC started to show their true colors. A lot of customers decided to take the “Super Jupiters” instead of waiting and we (on the forums) were shocked when the pictures hit of what the “Super Jupiters” actually were: second hand machines that were running in KnC’s data centers, coated with dust, barely working.
I was thinking of cancelling my order (like a lot of folk on the forums) but then KnC announced the “Hash while you wait” as well as the bonus machine so I, and a lot of folk on the forums stuck it out. Finally got my hands on my Neptune miner (delivered past the due date) and had a few problems. KnC worked to resolve them (although not as fast as before, now we had to wait weeks for KnC to first “analyze” what was wrong and then send a replacement). It was better than what those poor people got with their “Super Jupiters” anyway.
Remembering how well they delivered when they first came to market, I jumped on the bandwagon in the first 5 minutes of when they announced they were going to make a Scrypt miner, I bought into the Titan.
I was one of the first to get a Titan, and had probably the most problems. It would not hash over 30MHs, well below the 300 promised, with constant restarts as a bonus. I remember getting it on a Friday, it sat in the corner, powered down, till Monday when I started calling KnC and writing on the forums. […] What KnC sent us was a miner that was clearly not even half-baked, the software was pre-alpha (I’m a programmer myself). […] It was not till two weeks or so later that KnC released an update and I could finally hash a bit without the constant restarts, but still well below the 300MHs promised.
My miner was so bad, and I made so much noise about it, that KnC eventually remote connected to my computer and made a few software changes to get my miner not to shut off and even start to hash a bit.
I was still one of the lucky ones, as I had signed up in the first few minutes for the Titan, my machine had a 1 year warranty […] for a clearly less-than-half baked machine.
After a while with the firmware updates and over-clocking the machines I started to get the promised 300MHs, or close enough (290MHs-295MHs) so when I saw the offer to change to a Batch 2 Titan or stick with the Neptune as the bonus machine, I figured by Batch 2 (remembering the old Jupiter machines) they would have fixed everything. I chose a Batch 2 Titan for my bonus machine.
All the while we were having huge problems with their machines (fires, burnt out cores, random shutdowns, etc.). [At the same time], KnC was making press/twitter etc releases about how happy their customers were with the junk they had sent them. A bit after that they took away the option for a Batch 2 Titan, but I, and others have emails that we sent KnC asking for confirmation that we were getting a Batch 2 Titan, and always got a reply saying, yes, its confirmed.
Then I finally got the infamous email telling me that due to “technical issues” I was not going to get my Batch 2 Titan, take a Neptune or take 3 BTC. That was the final straw. Do KnC value their Titans at just 3 BTC now after [charging] 10,000 USD for them? (The price of BTC was around $230 when we got the “offer”, so a total of ~700 USD.) This was such a blatant bait and switch and I (and quite a few others) were furious. KnC was only doing this because they had gotten so used to cheating people and getting away with it. I was determined that I was going to do something about it.
After more than 48 hours, KnC had failed to provide comment for this article. However, the law firm did confirm to CCN.com that the case was active. Magnus Daar, a partner at the firm, said:
I can confirm that there are three pending class action suits against KnCMiner and at least 24 individual actions.
The lawyer also confirmed for us that our contact was indeed a client.
The Big Deal
What’s the big deal, some might wonder. At least they didn’t send anything, or essentially offer nothing, as was the case with Butterfly Labs. The answer is simple: the big deal is that if a company charges someone $10,000 for something and then doesn’t deliver, it is in their best interest (if they don’t want to get sued) to return that $10,000. By whatever means necessary.
Our contact was not the only one to have a horrible experience with KnCMiner who reached out. Another had no problem with us using his name for this article. He is Chandra Das and he resides in Florida. He has not yet joined the class action suit against KnC, hoping, as he said to this writer, “KnC would get their act together soon.”
But, to be blunt, that seems unlikely. KnC is presently offering Chandra 6.5 Bitcoins to refund him for an order he placed last June. As he put it:
The price of bitcoin last summer was about $600. US dollar price for a Mini Titan with shipping to the US was $3,897.60. On June 17, 2015 payment of this US dollar amount in bitcoin would be about 6.5 bitcoin. […] KnCMiner now proposes to repay 6.5 bitcoins as a “full refund” for an order totaling $3,897.60. Current price on Bitstamp at time of this message is $216. A refund of 6.5 BTC would not be a full refund, but would be about 36% of the amount paid ten months ago.
It may be hard to believe that a company that has been so enriched by this community is simultaneously so willing to treat its members with such disregard. It seems that somewhere along the way they lost sight of their mission of “securing the world’s most trusted blockchain” and moved on to “securing the linings of KnCMiner’s pockets.”
KnCMiner Going Strong
Despite having no less than 24 customers dissatisfied enough to involve the courts, KnCMiner has not cut and run in the sense that they are still doing business. While they failed to respond to CCN.com’s requests for comment on this article, even insofar as giving us a bland piece of advertising jargon, last month on the 11th of March they updated their news category with an explanation of why they had removed their web store.
We’ve finished shipping most of the hardware we’ve had on order and the final deliveries of the Titan and other bonus offers will ship over the next few weeks. […] As we’re moving away from mail-order sales we’ve removed the web shop from our domain and we’re switching systems for support, accounts, log-in, mobile access and more.
This last bit will be interpreted by the burned customers out there in only one way: they’re trying to delete the past and move forward. Fortunately, Bitcoiners are savvy record keepers, by and large, and those who have been done wrong have all the evidence they’ll need to successfully bring suit against KnC.
In the case of Chandra Das, it seems a matter of time before he decides to join in the case against KnC. He had the following advice to offer to newcomers who might cross paths with KnCMiner:
KnCMiner has thankfully moved out of the mining hardware business to offer their cloud mining services. Taking the decision to purchase cloud hashing requires due diligence and a degree of trust in the service provider. The customer’s trust is an invaluable commodity. KnCMiner would be wise to salvage their early customers’ trust, if they have hopes of returning on investments from the venture backers of their cloud hashing.
Swedish law indicates that prison sentences up to six years long can be imposed for the crime of fraud, and presumably, in a situation with this many victims, this could translate into a lot more time, depending on how the case was pursued. It would seem that Swedish authorities might take more interest in the doings of KnC if and when the class action suit against them is successfully won.
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