Bitcoin Mining Company Bitmine Facing Multiple Lawsuits for Defrauding Customers

April 7, 2015 10:55 UTC
Bitmine AG Owner Giorgio Massarotto (right)

Over a year ago, CCN writer Rick Mac Gillis interviewed Kerim Chikhi, a representative of Bitmine AG, the Swiss ASIC miner manufacturing company. Even then, customers had been waiting months for refunds since their orders were never fulfilled.

Background

At the time, Chikhi confirmed the claims of many customers that they had been waiting “1-2 months” for refunds. When asked if his company had ever shipped a single mining rig, Chikhi said:

I won’t point out a specific post, but on our official forum, you will find, among many negative comments, customers actively discussing our equipment.

Chikhi pointed to this fact with a note of pride. More recent events, such as the sock puppetry that takes place in the forums of a certain other mining rig company, make even this claim suspect. It is just as likely that every single word of positive feedback was bought and paid for as it is that it was not. He also claimed that 99% of pre-orders had been “cleared.”

 

Now that 99% of preorders are cleared, and all refund requests registered there are [fewer] inquiries than usual, but being summer there may be somebody of the staff on vacation, which may lead to some delay to answering to all requests.

As a final attempt to assuage doubt about his company or its practices, Chikhi said:

[…] keep in mind most of [the] satisfied customers just use their equipment and do not post online to provide feedback about the company. Refund requests may have needed their load of work, but we never felt we needed any additional staff to handle them.

What’s Going on Here?

Back in September of 2013, Bitmine announced a new product, the CoinCraft Series 28nm. Even then, BitcoinTalk members were irate about having never received orders of previous products:

This was just one among a host of other bad business practices, such as this, where they had begun cloning Avalon rigs and pre-selling the clones:

The depth of the company’s apparent misdeeds is truly rather mind-boggling for those who are just becoming familiar with the company. CCN hopes that this report serves as a warning to avoid this company and any other who’d treat its customers in such a way. Numerous reports from Swiss citizens and others have shown that the Swiss government is unwilling to take criminal action against Bitmine AG, leaving customers to file civil suits. At least five are currently in the process of doing so, and last month one reported to BitcoinTalk that no representative of the company had shown himself in court:

Customers Still Not Refunded Over A Year Later

What follows is the story of just one burned customer of Bitmine. It is not actually the story of the first person to contact us about Bitmine’s most recent attempt to rope its customers in one final time, as that customer appeared unable to provide the documents and evidence specific to his case. His initial tip read:

I purchased a Bitcoin machine from Bitmine AG on December 2, 2013. I have not gotten a machine or a refund as of today. I have sent over 50 emails as well as called the listed number have gotten no response. I have followed the bitcointalk forum on Bitmine and have seen the same thing repeatedly with other individuals with the same issue. […] Mr. Giorgio Massarotto is the owner of Bitmine and has scammed many people out of their money. They have also violated Swiss law by not paying proper taxes, he has emptied out their bitcoin wallet and is no longer anywhere to be found or heard from. The most frustrating part of the whole thing is none of the authorities in Switzerland will do anything about it. I have send countless correspondence to Federal police, local police, tax agencies, and cybercrime agencies and have not gotten any response. I would like to request an investigative news piece to be published to make as many people aware of this as much as possible. I would really appreciate your help on this matter. If there is any other information I can provide please feel free to contact me. Thank you in advance.

Here is a picture of how the BitcoinTalk community feels about Giorgio Massarotto. As you can see, an overwhelming number of these negative comments have to do with fraud.

CCN was, after much effort, able to get hold of a customer who, on certain conditions, was willing to provide all of the documents we needed to be sure that his story was not a fabrication. We are not in the business of defaming companies for the sake of defaming them. We feel that Bitmine has had more than an adequate, reasonable amount of time to dole out refunds, since it failed to push out the equipment in a term that would have been profitable for the customers.

We hope that by publishing this story on its own, other Bitmine customers who have been left in the cold will come forward, or, better yet, Bitmine will make right on its obligations and return people’s money – more than a full year after we first reached out to them.

The Story of C. O.

Our source, who prefers that we only use his initials in all mention of him, is a citizen of Norway presently residing in the UK. Thereby, he has attempted to get the Norwegian embassy to help in his quest to have his sizable investment returned to him. At no point did he intend to make a donation to the personal retirement funds of Giorgio Massarotto or Kerim Chikhi and at every turn he took the required steps to have his funds returned, once it became clear that his miners would never arrive in the mail.

Here is his original order receipt, from February, 2014:

For the benefit of CCN, C.O. was also able to provide original screenshots of his order. For the record, habitual screen shooting is a good practice for those who wish to be able to prove what they say. Although the authenticity of C. O.’s story is evident, when charging a large, apparently moneyed organization with fraud, news outlets will be cautious, especially when there is not a preponderance of evidence.

C. O., who was wise enough to verify this reporter’s credentials before divulging anything, said to CCN:

On 14th February last year I ordered a CoinCraft desk 1TH unit the price of which was $5700ish. The delivery was promised for 4th week in March. At the end of March I had been looking around and there were other alternatives so I demanded a refund. This was denied, although if delivery was late by more than 60 days they confirmed I could request a refund after 31st May 2014. On the 7th June 2014 I gave them my refund instruction, and according to their own terms and conditions they have 30 days to return my funds (after the 60 day period of late delivery). There was no reply so on 18th June 2014 I sent them an email to chase along with 29th June 2014. On the 9th July I sent a firm email to say I was disappointed with their lack of response and ignoring my emails and made a strongly worded demand to confirm my refund.

On the 9th of July, Kerim Chikhi responded to C. O.’s requests:

Dear [C. O.],

[W]e never “chose” to ignore your emails but it’s simply that the huge backlog makes it difficult for us to answer to every mail.

About your refund request, I attach you the refund form but I’d like you to be aware we are facing some difficulties to process all the refund requests we have received.

Given your position in the refunds processing queue and our cash-flow projections, your refund is expected to be processed about on the second half of October, 2014 if registered today.

We understand this may be a long time to wait for, as such we would like to give you some alternative options that may be available in shorter time:

1) We may restore your order and send it to you with 100% more hashing power than the original order was. That is, if you ordered 1TH/s, you would get 2TH/s. Shipping would usually take place same day or day after we received confirmation from you, anyway not more than 5-7 days.

2) You may convert the amount we owe you (including the 10% penalty) into hosted mining contracts, which will be available from August 15th. More information is available at https://bitmine.ch/hosted-mining-plans-now-available-starting-1gh/

Let us know if you are interested in exploring either of the alternative options, otherwise we kindly ask you to bear some more patience until your refund is processed.

A couple of things to note here. One, this is a month after Chikhi told CCN that 99% of pre-orders had been cleared and that all refund requests had been registered. In fact, it was around the same time of his interview with CCN that C. O. had placed his futile request for a refund. His goal in doing so was to buy other mining equipment and hopefully actually make some money in Bitcoin mining.

To add insult to injury, as our original tipster noted, Bitmine relentlessly tried to sell C.O. yet another product (cloud mining or a double order). By this point, C.O. was simply not interested in doing business with the company, and by all rights, including those of their terms of service, they should have simply refunded him and let him be on his way.

No Response Since July

The cheeky, sales-pitch-laden response from Kerim Chikhi in July, 2014, was the last C. O. ever heard from Bitmine, despite their claim that his refund would be processed “about on the second half of October, 2014.”

C. O. confirms what our original tipster said about the Swiss authorities. He says he wrote letters to both the Swiss Federal Department of Justice Police and the Swiss Coordination Unit for Cybercrime Control, neither of which have yet responded to his inquiries (sent in November).

Conclusion

Despite all the dissatisfied customers from the past two plus years, Bitmine remains in operation (allegedly). The CoinCraft which C. O. once bought for nearly $6,000 now goes for roughly $1,000, although, unsurprisingly, it is out of stock.

Pre-orders have proven a disastrous endeavor for numerous customers of more than one company. You have to think about this rationally: they’re essentially selling you something that does not yet exist. This isn’t a record or a film we’re talking about. It’s a piece of a cutting-edge, unproven technology. So perhaps the real conclusion to take from C. O.’s story is that pre-orders are never a good idea unless you’re the one manufacturing them.

A Facebook community has been started for those burned by the company. To keep up with developments, this seems to be the best thread to follow.

Images from Shutterstock and protected sources for phm.link.

CCN encourages all customers burned by Giorgio Massarotto and Bitmine AG to reach out: paul.madore@cryptocoinsnews.com. Especially if your story is significantly different from that of C.O. It is the duty of the cryptocurrency media to expose wrongdoings so that they are not exacted upon the ever increasing number of newcomers who may be susceptible for lack of information alone.

Last modified: April 7, 2015 10:57 UTC

@bitillionaire

P. H. Madore has written for CCN since 2014. Please send breaking news tips or requests for investigation to bitillionaire+phm@gmail.com. He lives in Maine, USA. A single father of four young children, he does not discourage financial donations, provided they do not come with strings attached.