Bitmain, one of the largest cryptocurrency mining companies in the world is suing three of its ex-employees for launching a rival Bitcoin mining pool called Poolin. According to Bitmain, the trio violated their non-compete agreement and it is, therefore, seeking $4.3 million in damages, reports Coindesk on June 17, 2019.
Per the report, six lawsuits are pending in the Beijing Haidian District court and it involves Bitmain and three of its former employees. The ex-employees are Zhibiao Pan, Fa Zhu, and Tianzhao Li who are respectively the CEO, COO, and CTO of Poolin, the world’s seventh largest Bitcoin mining pool, a software that is used to split mining rewards between miners.
Three of the lawsuits are from the Poolin co-founders who individually sued Bitmain in order to be released from a non-compete agreement they had signed before leaving the company in mid-2017. The agreement was that they will not launch a rival Bitcoin mining pool as long as Bitmain pays a monthly agreed fee for a specified period of time.
However, the trio is now claiming that Bitmain invalidated their contracts by not paying the compensation on time and as such, they are no longer bound by the non-compete agreement. Video footage of the court section only threw light on Zhibiao Pan’s agreement where Bitmain was to compensate him with $2,780 for 24 months.
Further reports reveal that as of November 2017, Pan, Zhu, and Li had only launched Poolin as a mining pool for other cryptocurrencies. The Bitcoin pool service was only launched in July 2018 and it grew to become the third largest Bitcoin mining pools as of February 2019.
Bitmain, on the other hand, has two Bitcoin mining pools and these are Antpool and BTC.com, both of which are the world’s top Bitcoin mining pools by hash rate. Bitmain’s financial report revealed that its highest revenue comes from selling Bitcoin hardware mining equipment. The latter is evident in its mining pool income of only $43.2 million in the first half of 2018 but a $2.7 billion income generated while selling mining rigs.
After being sued individually by Poolin’s co-founders, Bitmain countersued each of them for damages. It claimed that they had violated the non-compete agreement by launching Poolin, a competitor that has led to significant losses in the company. Poolin, on the other hand, had mined 26,825 Bitcoins valued at $220 million.
To that effect, Bitmain is seeking that the compensation which was paid after the trio left the company should be repaid with an additional fine of $667,000 for reneging. It also wants the trio to honor the no-compete agreement as earlier signed. Furthermore, Bitmain’s lawyers are arguing that the 28,650 Bitcoin should be considered as profit that was made from violating the agreement and as such, it should be repaid as a loss to their client.
According to the lawyers:
“As of Feb. 14, the total profits for Poolin would be 26,825 bitcoin times 4 percent, which was their handling fee, and times bitcoin’s price at the time, which was 24,518 yuan [$3,500].”
Going by these demands, the alleged fine could amount to $4.3 million.
Lawyers of the Poolin co-founders have, however, not agreed to the demands and stated that Pan, Poolin’s CEO is no longer bound by the agreement because the chip manufacturer failed to pay the compensation on time. They pointed out part of the agreement which stated that if A (Bitmain) fails to pay B (Pan) within a month since B’s departure, then A has voided its obligation.
One of the lawyers noted that the transaction fee received by Poolin to mine that amount of Bitcoin did not mean that the company made profits since it had not turned a profit until the date of the hearing. They also argued that Poolin’s mining of 26,825 Bitcoin did not necessarily mean a loss for BTC.com.
“There are a lot more bitcoin mining pools in this network. It’s not just Poolin v.s. BTC.com. Even if Poolin didn’t operate its bitcoin mining pool, it does not necessarily mean Bitmain will be able to mine those coins.” the lawyer argued.
At this time, it is still uncertain on what the judge will decide on and the two sides were already asked if they’ll like to settle at the end of the hearing. Bitman’s lawyers decided that they will rather discuss it after the hearing has been adjourned.