American Firm Brings Lawsuit Against Bitcoin.com, Bitmain Over Hash War
December 7, 2018 by Ian Edwards
An American blockchain technology company has filed a lawsuit against Bitcoin.com, Bitmain, Kraken Exchange, and others, alleging they illegally manipulated the Bitcoin Cash network during the recent November hard fork. It appears that the hash war, which observers attributed Bitcoin ABC winning, may not be over yet.
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The Hash War Left a Hangover
Miami-based United American Corp (United Corp), which operates blockchain data centers in the Canadian province of Quebec and develops related technology, filed a lawsuit in U.S. federal court in Florida on December 6th against more than ten defendants over actions taken during the Bitcoin Cash hash war.
Named defendants include Chinese mining firm Bitmain and its CEO Jihan Wu, cryptocurrency entrepreneur Roger Ver and his company Bitcoin.com, U.S.-based cryptocurrency exchange Kraken, and key team members of Bitcoin ABC.
The complaint, which was filed by attorneys from American law firm Akerman, alleges that “a scheme by a tight knit network of individuals” manipulated the market for Bitcoin Cash, causing “damages and irreparable harm” to United Corp. The complaint argues that the defendants engaged in a:
“conspiracy in unreasonable restraint of trade in violation of Section 1 of the Sherman Act and Section 4 of the Clayton Act.”
The Sherman Act and Clayton Act mentioned are antitrust laws used in the United States to regulate competition among businesses. The lawsuit may be the first to use an antitrust argument as a basis for a legal claim due to losses in the value of a cryptocurrency. The defendants have 21 days to respond to the complaint.
Bitcoin ABC Developers and Kraken Also Named
The complaint argues that when Bitmain reallocated miners who had been mining BTC to Bitcoin.com’s BCH pools in the minutes before the implementation of the Bitcoin Cash network upgrade, they effectively took control of the Bitcoin Cash blockchain, centralizing it and violating the ground rules that other network participants had been following.
Further, United Corp alleges that Bitcoin ABC developers Amaury Sechet, Shammah Chancellor, and Jason Cox also joined the scheme when they implemented changes to the BCH protocol. Known as “Deep Reorg Prevention,” the changes created “checkpoints” which made it more difficult to successfully execute a “reorganization” attack against the BCH blockchain.
Kraken’s alleged role in the scheme came when it agreed to list the Bitcoin ABC version of Bitcoin Cash as “BCH” on its exchange.
Decline of BCH Since Hark Fork Attributed to Defendants
Since the hard fork, the value of BCH (and other cryptocurrencies) has fallen sharply. BCH sold off a further 20 percent on December 6th. United Corp claims it suffered losses due to the reduced value of the BCH it mines, which it blames on the defendants.
There is little dispute about the complaint’s allegations that Bitcoin.com, a BCH mining pool, received a boost in hash power from miners controlled by Bitmain that had been previously mining BTC. On November 15th, Roger Ver tweeted that:
The https://t.co/6EeRmpfaH7 pool now has more hash rate on it than the entire BCH network had earlier today.
Bitcoin is cash for the world! #BitcoinCash #bitcoincashfork pic.twitter.com/n2MqQ5mlfK— Roger Ver (@rogerkver) November 15, 2018
It should also be noted that Craig S. Wright, the architect and a proponent of Bitcoin SV, the rival of Bitcoin ABC during the hash war, made threats of intentionally lowering the price of BTC during the lead-up to the hard fork:
To all BTC miners…
If you switch to mine BCH, we may need to fund this with BTC, if we do, we sell for USD and, well… we think BTC market has no room… it tanks.
Think about it. We will sell A Lot!
Consider that….
And, have a nice day(BTC to 1000 does not phase me) pic.twitter.com/oUScEahtWc
— Dr Craig S Wright (@ProfFaustus) November 14, 2018
Bitmain is one of the largest miners of BTC through its pools BTC.com and Antpool.
United Corp Argues Antitrust Violations
Bitsonline spoke with Lawry Trevor-Deutsch, a Senior Vice President of Corporate Affairs at United American Corp. He argued that the defendants’ actions around the BCH hard fork amounted to interference with economic activity and were violations of anti-trust laws. He said that if BCH is going to be a currency, actors cannot manipulate and co-opt the market.
Mr. Trevor-Deutsch also said that the reason people trust cryptocurrencies like BCH is because there is a faith by users that it is independent and run on democratic principles. United Corp argues that Bitcoin Cash was manipulated by the defendants and that faith was lost, resulting in the value of BCH declining.
Bitsonline reached out to Bitmain, Bitcoin.com, Bitcoin ABC, and Kraken for comment, but haven’t heard back at the time of publication. We will update the piece if new information is received.
What do you think of the lawsuit by United Corp?
Images via Pixabay
