Three plaintiffs allege in a class action that preorders offered by Obselisk and its parent company for SC1 and DCR1 cryptocurrency mining appliances were nothing more than a scheme to raise millions of dollars through the sale of unregistered securities.
In a lawsuit recently removed from state to federal court in California, three plaintiffs allege preorders offered by Obselisk, Inc. and its parent company for SC1 and DCR1 cryptocurrency mining appliances were nothing more than a scheme to raise millions of dollars through the sale of unregistered securities. According to the lawsuit, the preorders were sold based on misrepresentations of the products’ delivery date, specs, and profitability, as well as the availability of full refunds should the hardware not live up to the defendants’ claims.
Filed against Obelisk, Inc.; its parent company, Nebulous, Inc.; and the companies’ CEO and vice president of operations, the lawsuit explains that the defendants developed Application-Specific Integrated Circuits (ASICs) known as SC1 and DCR1 designed respectively for mining Siacoin and Decred. The mining process for both cryptocurrencies, the case goes on, utilizes the hardware to solve “complicated mathematical problems with cryptographic hash functions” for which miners, who are in competition with other miners, could be rewarded with Siacoin or Decred.
During the presale process, the defendants allegedly promised investors that the products would meet a specified hash rate and be delivered by June 2018. Buyers, the suit says, were also assured that they would receive a full refund if the applications didn’t arrive by the deadline or perform according to their specifications.
Contrary to these representations, the defendants failed to ship the mining applications by June 2018, the plaintiffs allege, and admitted that the products’ hash rates were actually “far below” the rates promised during the presale. The plaintiffs, according to the suit, submitted refund requests but have yet to receive full refunds for their purchases.
“In short,” the complaint reads, “Defendants promised Plaintiffs and members of the class the moon, delivered them an overpriced paperweight months late, and then reneged on their promise to provide refunds if they were unable to provide Miners on time or up to their specifications.”
The lawsuit argues that the preorders were essentially securities that were never registered with any state or federal government entity.