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New York Bitcoin Mining Magnate Accused of Stealing Over 5000 Crypto Miners

Last Updated March 4, 2021 2:44 PM
P. H. Madore
Last Updated March 4, 2021 2:44 PM

By CCN.com: A New York Bitcoin miner hosting company called Northway Mining  stands accused of stealing at least 5100 pieces of mining equipment from two companies. Given the scope of the investigation currently underway by the federal government, the damage might be much more significant than this.

Northway Mining Sued For Violation of RICO Act

At least four Bitcoin companies have been allegedly victimized, though we use the term “allegedly” in its most legal definition: strictly because the accused have not yet been convicted.

MinedMap, Inc, Serenity Alpha, Inc, both of Nevada, and Quebec, Inc from Canada. The other is BlockAssets, a company based in Perth, Australia.

The former chose Northway Mining to host more than 2800 Bitmain S9 miners, over half of its entire fleet, in September 2018. Another 800 miners were sent to the facility by the companies. The latter had the decision made for them by a Canadian company who couldn’t handle their 1500 units. We’ll be following up with a story about BlockAssets at another time.

As to MinedMap, Serenity Alpha, and Quebec Inc, they’re collectively filing lawsuits against Northway Mining, as a start. At the same time, the issue is currently being treated as a criminal investigation by federal authorities. As you can see in the videos below, the US Marshall Service searched the facility leased by Northway in Coxsackie, New York, this past week.

Over 5000 Bitmain Miners Stolen in All

The pending lawsuit alleges that Northway bilked clients out of nearly 3600 pieces of Bitcoin mining equipment (one was recovered with the help of the Marshalls), as well as over $500,000 in deposits. The complaint records this:

Québec Inc. also requested the return of its deposits of $46,746.09, $23,255.66, and $23,824.42 for a total of $93,826.17 because its deposits had not been spent on electrical power since the Miners were not plugged in. […] On September 21, 2018, MinedMap and Serenity wired $162,000.00 to Northway as a deposit on the electrical costs Northway was to incur hosting MinedMap and Serenity’s Miners. In addition, almost one week later, MinedMap and Serenity wired an additional $270,000.00 as an additional deposit for electrical costs Northway would incur in providing electricity to MinedMap and Serenity’s Miners.

CCN.com spoke to Daniel Injoon Kim, who is a managing partner with MinedMap and Serenity Alpha. Between the companies, they have over 5,000 Bitmain S9s operational. They would have over 50% more if it had not been for what happened with Northway Mining, a facility they hired to manage a new batch of miners.

They had the miners shipped directly from Bitmain last September, and as the video above shows, many of the boxes were found, but no miners. Kim and some partners have been mining since 2016 in Canada, but when Quebec placed a moratorium on new mining operations, they were forced to colocate with a partner. They found Northway on the recommendation of a broker they knew. Kim and his partners believe that this broker acted on good faith.

“Where Is My Money? Where Are My Miners?”

After the Bitcoin miners arrived at the facility in Coxsackie, it’s a mystery what happened to them. The likely scenario is that they’ve been resold. The miners could be somewhere operating on behalf of Northway at this point, but that can’t be verified.

Court documents claim that the facility was unable to host even 200 miners as of June 2018, which underlines the fraud allegations – plaintiffs believe that the fraud was organized and intentional from the beginning.

The miners having been brand-new, the question of why Bitmain can’t do more to locate them arises. Kim isn’t sure, and the ongoing lawsuit against Bitmain regarding the way new miners connect to Bitmain servers is news to him. He does note that Bitmain have been as helpful as he expected.

Kim told CCN.com:

We made a deal to have our miners hosted in their facility located 30 minutes south of Albany, NY. They lied to us continuously until the very end. We wanted to pull out the miners finally in February, he then says talk to our lawyer and as of today, May 2nd, 2019 they left our boxes, 1 miner, and have resold or hosted with other entities at 3rd party facilities.

Facility Owner Sues Northway, Too

According to court filings , Northway Mining owes the owner of the facility a significant sum of money. Kim says that Ultegra was part and parcel to the scam:

The lender, Ultegra Financial has colluded and is a part of the fraud ring.

However, Ultegra is still trying to recover lost money from Northway.

MinedMap, Serenity Alpha, and Quebec Inc have a joint lawsuit against Northway , which names several partners in crime: Michael Miranda, Michael Carter, Dror Svorai, Motorcycle Salvage, LLC, Mining Power Group, and Hudson Data Center.

The suit uses the RICO Statute – yes, the one that brought down half of the mafia throughout the 1980s and 90s. In total, eight separate charges are listed in the complaint. Kim says his law firm is doing a “fantastic job right now” and the allegations of criminal conduct are what led federal officials to get involved.

Around $1 Million In Lost Revenue

The lawsuit says that the plaintiffs have collectively lost around $1 million in Bitcoin mining revenue. It additionally states that the miners themselves are worth about $900,000 based on current market conditions.

Had Serenity and MinedMap timely received their Miners, they would have earned at least $1 million dollars to date.

Plus legal fees and the cost of wining and dining Northway partners, the alleged scammers have gotten off with a pretty sizable haul.

The Scammer Takes Off The Mask of Cordiality

The relationship between Daniel Kim (and his partners) and Northway devolved over a five-month period, in which the miners were never installed or used. Michael Maranda continually made excuses for delays, and eventually, when it came time to refund the money, said the money had been used in some other “buildout.” The lawsuit alleges that Maranda used company funds for several personal expenditures, including vehicles and real estate.

The situation with Northway devolved after months of waiting for Northway to install and begin mining.
Marranda became increasingly defensive and even claimed to send a refund, which never materialized.
Michael Maranda has yet to respond to the pending, multi-million dollar lawsuit brought against him, which accuses him of violating the RICO statutes .

After months, Michael Maranda told Serenity and the rest that he would be moving their miners to another facility called Coinmint. This never happened.

Northway CEO Michael Maranda says he used all of the deposit money building a new facility.

Michael Maranda has yet to respond to the lawsuit, which has moved to another jurisdiction. We encourage anyone familiar with him or his whereabouts to contact attorney T. Edward Williams  with any information.

This is a developing story, which will have follow-ups in the coming weeks.