In both cases, Biofuel claims, the companies shipped equipment from China to their hosting facility in Eastern Kentucky, then left with the bitcoins produced, leaving behind hundreds of thousands of dollars in unpaid energy bills and hosting fees.
Biofuel reached an agreement with Touzi in early 2022. for $60,000, but despite returning the mining equipment, claims it has not received the amount owed under the settlement.
In the still-unresolved dispute with VCV, Biofuel received permission from the Martin County Circuit Court in Kentucky to sell the mining equipment, Whites said, to recoup some of the money it owes (she did not confirm the amount), but she claims that all no compensation has yet been awarded. VCV stopped responding to messages, she claimed.
Biofuel has since folded, driven out of business by failed hosting ventures. “I literally lost my house – I lost everything. It ruined me financially,” says Wes Hamilton, former CEO of Biofuel Mining. “I’m just so frustrated with the whole thing.”
There is little opportunity for financial recovery for companies like Mohawk and Biofuel. The situation is complicated, as in the case of Mohawk, if they deal with the so-called special purpose entities. Because they were created by their parent companies for a specific business venture, these entities need not worry about their long-term ability to operate in the US.
“It can certainly be more difficult to recover damages from a non-US counterparty,” says Kim Havlin, a partner in the global commercial litigation practice at the law firm White & Case. “There’s certainly a risk that an entity that doesn’t need to be in the U.S. just ignores the case.”
Even if the owners of the Kentucky facility win in court, it may be difficult to collect the damages awarded. “A judgment is essentially a piece of paper. Any judgment has to be converted into assets or money to be valuable,” says Havlin. If the opposing party refuses to pay and has no US assets to collect against, sometimes this is not possible.
Almost a year after the dispute began, the Mohawk case is stuck in legal limbo. In a setback for Mohawk, the presiding judge recently denied his motion to dismiss HBT’s appeal, on the basis that he failed to sufficiently support his argument. The judge also pushed Mohawk’s counterclaim into arbitration, a forum for resolving disputes privately instead of in open court. Non-U.S. countries tend to favor arbitration as a way to “remove a domestic forum from both parties,” Havlin explains. “You cannot choose an arbitration venue in any state as a means of creating a neutral playing field.” A parallel hearing in federal court is scheduled for December to discuss whether Mohawk should be granted an injunction preventing it from sold the remaining HBT equipment it owned.
