Analysis: why there may be a lot more to that Bitcoin Cash ABC lawsuit than it first appears
As we’ve reported this morning, one half of the Bitcoin Cash Fork – Bitcoin ABC – is now facing legal action from a company called United American Corp. regarding its actions immediately after the fork. So, who are they, and why are calling in the lawyers now?
One of Dr. Craig Wright’s many lines of attack on Bitcoin ABC in the time surrounding the highly acrimonious split in the Bitcoin Cash fork on November 15th – which left his cryptocurrency, Bitcoin SV, and Bitcoin ABC as two cryptos where there once was one – was to offer support to anybody that would bring legal action against Bitcoin ABC for its actions at that time. Top of the list of moans from the SV side was the parachuting in of extra mining power via the Bitcoin.com mining pool – ostensibly to defend the ABC blockchain against threats from the SV side that they would seek to attack their rival.
Just a reminder
If Jihan and Roger break their contracts and direct BTC miners of users to BCH for a day…
We will help you start a long messy class action.
No #socialists telling you what your systems do pic.twitter.com/EojqC4frft
— Dr Craig S Wright (@ProfFaustus) November 15, 2018
While UnitedCorp’s legal proceedings are nothing like a class action, they do revolve around this “transient hash”, a boost in processing power temporarily employed immediately after the fork. Beyond this, the legal action describes what it believes is a conspiracy to take control of the Bitcoin Cash blockchain that involves many of the players we do know – Bitcoin.com’s Roger Ver, Bitmain’s Jihan Wu, ABC lead developer Amaury Sechet, the Kraken exchange’s Jason Powell – as well as roping in the Chinese Govt. and its China International Capital Corp. off-shoot.
It’s a theory that’s all outlined in great details in this presentation on a website that has magically appeared in the hours since the legal action was announced. There’s even a handy visualisation…
That’s the broader ‘why?’ dealt with, then; so, what about the ‘why United?’ bit?
Cause and effect in such situations is a difficult thing to prove, of course – the world we live in revolves around, in the words of Paul Simon, “loose affiliations of millionaires and billionaires” – but, baby, it is worth looking into United American Corp. a little, because nobody seeks legal satisfaction for funsies.
That being said, United American Corp. is no stranger to legal action. It is currently embroiled in patent disputes with Facebook, Instagram and Snapchat over what it sees as infringement of it iFrame geolocation technology.
But why does it want to pick a fight with Roger Ver and Bitmain? Well, a quick skim across the UnitedCorp website (actually, can we just say United from now on? Yeah, let’s do that) reveals that the company – driven by Canadian CEO Benoît_Laliberté, who attained a level of notoriety in his native Quebec for his role in a long-running share scandal revolving around a company he created called JITEC, that rattled through Canadian courts for the a decade from 2003 – has a vision of creating “a synergistic network of seamless digital telecommunications technologies and applications.”
This vision includes involvement in ventures as diverse as VoIP, social media, as well as blockchain tech. Presumably, however, the Bitcoin ABC litigation is most closely linked to its cryptocurrency mining interests. The project in this area that it is most closely linked to is the deployment of its so-called BlockchainDomes – eco-preservation-focused cryptocurrency mining facilities that are designed to be easy and quick to deploy, offering the opportunity to use the spare heat from mining for agricultural uses. While United American Corp is registered in Miami, it would appear that much of its data centre activity is based in the much cooler climbs of its CEO’s native territory: Quebec, Canada.
While in November, it was reported that United was rolling out the last part of its BlockchainDome campus, an earlier press release from June covered CAD$21 million agreement for the expansion of that mining operations with an unnamed Vancouver-based mining firm. So presumably not only is United heavily invested in mining, it is heavily invested in the fortunes of miners in that specific area of Canada – where it has plans to build another BlockchainDome ‘Heat Campus’ in early 2019.
Also interesting, at least on a superficial level, is the relationship between the Vancouver-based mining company Square Mining, and the company owned by one of the two main Bitcoin SV advocates, Calvin Ayre – who, as of August 2017, became the owner of the CoinGeek mining pool and news site. CoinGeek recently has been the major mining force backing up the Bitcoin SV blockchain, and Ayre is one of the most vociferous critics Bitcoin ABC and their use of ‘Transient Hash’ (he may have even coined the phrase in this context).
Ayre won’t be the owner of CoinGeek for very long, however. A press release from November 30th informed us that CoinGeek’s mining assets and website was in the process of being wholly purchased by Squire Mining, a Canadian exchange-listed public company, in a deal that is – on the face of it – valued at around CAD$60m. The addition of CoinGeek’s 64,000 mining machines – 6,000 of which are in Canada, by the way – it is a deal that, according to the press release trumpeting it, makes Squire “the largest, publicly traded Bitcoin miner globally.”
Note: when Bitcoin SV supporters say Bitcoin, they don’t mean BTC – and as Squire’s comments on Bitcoin SV go as far as to say that “BSV’s plan will… drive growth in the mining hardware sector, reinforcing the Squire team’s optimism on future growth prospects,” among other complimentary soundbites, it’s probably fair to say they don’t mean BTC either. However, Squire’s description of itself takes time to point out that it’s “in the business of developing data mining infrastructure and system technology to support global blockchain applications in the mining space including application specific integrated circuit (ASIC) chips and next generation mining rigs to mine Bitcoin SV, Bitcoin Core and other associated cryptocurrencies.”
The interesting thing about the deal between Squire Mining and CoinGeek, though, was that there wasn’t actually a lot of cash changing hands. The majority of the deal’s value – about CAD$34m – came in Squire Mining shares, 126,418,565 ‘common shares’ to be exact, with the rest being a Vendor take-back note (aka a posh I.O.I.).
That leaves Calvin Ayre’s Bigfoot Holdings Group as the owner of a 53.3% stake in the “issued and outstanding Squire common shares”. It would appear then, that Ayre swapped CoinGeek for a job at CoinGeek and a significant stake in one of the biggest publicly listed mining companies in the world, whether or not he controls Squire or not – the term Common Stock usually implies voting rights – that amount of of a company gives you an influential role, however you cut it. If nothing else, Ayre has a lot of skin in the game of making those shares go up in price.
So – deep breath – we have:
- The legal action being bought in US Courts by the the US-based parent company of a Canada-based mining concern.
- The legal action names the biggest competitor (Jihan Wu/Bitmain) of a Canadian exchange-listed crypto mining outfit (Squire Mining), just as said competitor is lining up an already troubled Initial Public Offering.
- That Bitmain IPO, should it go ahead, would dash Squire’s chances of becoming the biggest publicly listed crypto mining concern in the world.
- The legal action alleges that the Chinese government – with which (lest we forget) the US is embroiled in a trade dispute at the moment – is heavily involved in underwriting the whole (what it characterises as nefarious) venture.
- Squire Mining, which is based in Quebec – like United American Corp.’s Blockchain-based enterprises – has a 50%+ shareholder who is deeply invested in Bitcoin SV both philosophically and financially.
- That shareholder would, presumably, be one of the biggest beneficiaries of this legal action (or at least enjoy it the most).
- Bitcoin SV’s backers have consistently threatened legal action against SV – or to help anyone who wanted to take legal action.
- United American Corp, with its BlockchainDomes arm, is heavily invested in the future of Quebec-based mining operations, including a CAD$21m deal with an unnamed Vancouver based miner – with more facilities due to be coming online in 2019.
This is all wildly circumstantial. These are, at least on the surface, extremely loose affiliations here of a mutually beneficial nature. However, while Calvin Ayre seems to be taking great joy from all of this on Twitter, any conjecture that he’s orchestrating or aiding in all of this is just that – conjecture. Ditto for Dr. Wright, despite all his threats.
We did reach out to both Dr. Wright and Calvin Ayre in the hope of finding out whether or not they were aiding United American Corp. in any way with its legal action against Bitcoin ABC. At time of publication, we had received no response.
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