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CoinTerra Inc., an Austin, Texas-based Bitcoin mining and services company, filed for Chapter 7 liquidation late last month, just weeks after one of its key vendors filed a breach-of-contract lawsuit against CoinTerra seeking $5.4 million.
CoinTerra’s bankruptcy petition filed Jan. 24 estimates the company’s creditors range in number from 222 to 999, and that its liabilities range from $10 million to $50 million. The petition, filed in U.S. Bankruptcy Court in Austin, estimates CoinTerra’s assets at $10 million to $50 million.
A CoinTerra spokesperson could not be reached for comment. The company’s Internet home page says only that the firm has filed for bankruptcy protection and refers viewers to the bankruptcy court’s Web site.
CoinTerra sold high-powered computers and support services for generating, or “mining,” the Bitcoin crypto-currency. The firm was founded only in 2013 with at least $2 million in investor funding, according to the Austin Business Journal. CoinTerra, however, had financial problems and faced a lawsuits in the past year, according to Coindesk.com, an online publication that follows the virtual-currency industry.
In early December, one of CoinTerra’s key vendors, C7 Data Centers Inc., a Bluffdale, Utah-based data-center company that provides cloud-based infrastructure for clients, recently filed a lawsuit in a Utah state court seeking $5.4 million from CoinTerra for being behind on its bills and failing to live up to the terms of an 18-month agreement the companies signed in April 2014. The suit, now on hold because of the bankruptcy filing, alleges breach of contract and unjust enrichment.
According to the lawsuit, C7 said it asked the local power supplier for $12,000 a day in electricity to serve the CoinTerra contract. The contract called for CoinTerra to pay C7 $425,000 or more monthly. CoinTerra’s latest invoice has current charges of $426,243, including $350,381 for electricity. As of Dec. 1, CoinTerra’s unpaid balance was $1.4 million.
“Almost immediately after entering into the contract, CoinTerra fell delinquent, often paying less than the amount required to bring it current,” the suit says. In asking for $5.4 million damages, C7 sought payments through the end of the contract in addition to other expenses, attorneys’ fees and late fees. In a statement to Coindesk, CoinTerra said it disputed the allegations and filed a counterclaim in Utah, but hoped the companies could resolve the matter.
A meeting of CoinTerra’s creditors is scheduled for Feb. 27 in Austin’s federal courthouse.
