Digital Capital Drags Icelandic Mining Firm to Court Over Unpaid Service Fees

Digital Capital Ltd., a crypto finance and payment firm based out of London, has officially sued Genesis Mining Iceland EHF for failing to make appropriate payments for services.

According to a report from Law 360 earlier this week, the plaintiff accused Genesis Mining of not paying the fees for helping it develop and maintain its banking and credit card processing software, adding that the company was experiencing some financial problems and decided to stop honoring the plaintiff’s invoices for months.

Reneging on an Agreed Contract

The suit was filed with a High Court on January 21. Digital Capital explained that it had assisted Genesis Mining with getting regulatory approval and also helped it with building the software it needed to purchase goods with cryptocurrencies and a debit card. However, while Genesis had started honoring the terms of their agreement and was making payments initially, the firm suddenly stopped paying as far back as November 2018, most likely due to the drop in cryptocurrency prices that came from the crypto winter.

All in all, the British firm claimed that Genesis Mining’s payment snafu led to a £2.4 million debt and losses that could very well run until 2022. Now, it is seeking £6 million ($7.8 million) in fees from Genesis Mining, with the firm also explaining that any delays in the launch of a project from Genesis Mining will not be its fault, as the Iceland-based firm had failed to provide any technical specifications required for Digital Capital to complete the project on time.

On the flip side, Genesis had argued that they weren’t obligated to make any payments under the agreed schedule because certain deliverables from Digital Capital had missed the stipulated delivery date. Since they had no system to maintain, Genesis explained that they decided to shutter the deal entirely in June 2019.

The Ghost of 2018 Still Haunts Mining Firms

It’s impossible to decipher whether Genesis Mining just canceled the agreement or what caused this payment problem, but it’s looking more like mining companies have still not been able to shake off the effects of the crypto winter. Bitmain, the largest mining company in the world, showed more sparks in 2019, with several moves that suggested it was back to its profitable ways- most especially the eventual launch of its mining facility in Texas.

However, the firm eventually receded once more, with Bitcoin’s stall towards the end of last year, causing many to believe that the worst wasn’t yet behind the industry. The Chinese firm is now expected to lay off about 50 percent of its workforce. While it branded that move a simple approach to preparing for the upcoming Bitcoin halving, it’s easy to speculate that the company is experiencing some financial strains.

Canaan Creative, one of Bitmain’s biggest rivals, is in an identical boat as well. The firm went public last November to help raise funds to scale. However, despite setting an initially expected capital of $400 million and reducing that by 75 percent, it was still only able to raise $90 million from its IPO as sales started to slump.