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Ý¿-» ëæïèó½ªóðéððì ܱ½«³»²¬ ï Ú·´»¼ ïïñïçñïè п¹» ï ±º ïî

1 Frontier Law Center


Robert Starr (183052)
2 Adam Rose (210880)
Karo Karapetyan (318101)
3 23901 CalabasasRd,Sui te 2074
4 Calabas as,CA 91302
Telephone: (818)914-3433
5 Facsimile: (818)914-3433
E-Mai l: robert@ frontierlawcenter. com
6 adam@ frontierlawcenter. com
7 karo@ fronti erlawcenter.com

8 Counsel for Plaintiff

9
10 UNITED STATES DISTRICT COURT
11 NORTHERN DISTRICT OF CALIFORNIA
12
GOR GEVORKYAN on behalf of Case No.
13 himself and all otherssimilarlysituated,
CLASS ACTION
14 Plaintiff, COMPLAINT
15 v. 1. Violation of the Unfair Prong of
16 BITMAIN,INC. the Unfair Competition Law
,BITMAIN 2. Unjust Enrichment
17 TECHNOLOGIES,LTD.and DOES1 to 3. Conversion
10,
18 JURY TRIAL DEMANDED
19 Defendants.

20
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23
24
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27
28
CLASSACTION COMPLAINT
Ý¿-» ëæïèó½ªóðéððì ܱ½«³»²¬ ï Ú·´»¼ ïïñïçñïè п¹» î ±º ïî

1 Plai
ntiff Gor Gevorkyan and all otherssi
milarlysituated Plainti
ff
2 the followi
ng:
3 NATURE OF ACTION
4
1. Thi
sisa prospective classacti
on agai
nst Bitmain,Inc.and i
tsparent
5
companyBitmain Technologies,Ltd.(collectively Bitmain )i
n
6
connection withthe marketing and sale of itscrypto currencymining devi
cesknown
7
asApplicati
on Speci
ficIntegrated Circuits( s .As
8
alleged herein,untilthe complicated and ti
me-consuming i
niti
alizati
on procedures
9
are completed,Bitmain
10
electrici
tyto generate crypto currencyfor the benefi
t of Bi
tmain rather than i
ts
11
customers.
12

13 2. In the past,Bi
tmain ASIC devicescould be confi
gured and i
niti
ali
zed i
n

14 low-power mode that did not mine crypto currencyfor Bi


tmain.However,after

15 Bitmain establi
shed i
tself crypto currencyminersin the

16 last several years,Defendant redesi


gned i
tsASIC devicesto mine crypto currency

17 for the benefi


t of i
tself rather than i
tscustomerswho purchase the Products.

18 Conveniently,Bitmain cashesi
n on everysecond ittakesto get the ASIC confi
gured

19 withthe customers specifi


cati
onsand laysthe substanti
al costsof operating the

20 ASIC devicesat the feet of i


tscustomers.

21 3. Defendant hasengaged i
n an unfair busi
nesspracti
ce,hasbeen unj
ustly
22

23 4. Asa result of Defendant scheme,Plai


ntiff and the classmemberswere
24 inj
ured i
n fact and suffered ascertai
nable and out-of-pocket losses.
25 THE PARTIES
26
5. Plai
ntiff Gor Gevorkyan isa resi
dent of LosAngelesCounty,
27
California.He purchased Bi
tmain ASIC devices,includi
ng the AntMiner S9for the
28

CLASSACTION COMPLAINT 1
Ý¿-» ëæïèó½ªóðéððì ܱ½«³»²¬ ï Ú·´»¼ ïïñïçñïè п¹» í ±º ïî

1 purpose of mini
ng crypto currencyfor hi
spersonal fi
nancial benefit in approximately
2 January2018.The Product wasdi
fficult to configure.It took hi
m a substanti
al
3 amount of time to properlyconfi
gure the ASIC devi
ces.Duri
ng thi
stime,the ASIC
4 deviceswere pre-configured to mine and deli
ver crypto currencyto Defendant.Also
5 duri
ng thi
stime,the ASIC devicesoperated at full power mode,consuming a
6 substanti
al amount of electri
city .The ASIC deviceswere
7 mining crypto currencyfrom the moment Plai
ntiff started the device and it would
8 transfer anyelectroni
ccrypto currencymined to Defendant.Thiscontinued unti
l the
9 ASIC deviceswere associated wi
th personal crypto currencyaccount.
10 6. Defendant Bitmain,Inc.i
sa Delaware corporati
on wi
thi
tsprincipal
11 place of busi
nessat 251 Hi
ghStreet,Sui
te B,Palo Alto,California 94301.
12 7. Defendant Bitmain Technologies,Ltd.isa Chi
nese corporation withi
ts
13 pri
nci
pal place of businessi
n Beij
ing,Chi
na.
14
JURISDICTION AND VENUE
15
8. The Court hasj
uri
sdi
cti
on over thisacti
on pursuant to 28 U.
S.C.§
16
1332(d)because there are more than 100 ClassMembersand the aggregate amount
17
in controversyexceeds$5,
000,
000.
00,exclusive of interest,fees,and costs.
18
9. Venue i
sproper i
n thi
sDistrict pursuant to 28 U.
S.C.§1391 because
19
Defendant Bitmain,Inc.maintai
nsi
tsprincipal place of busi
nessi
n Santa Clara
20
County.
21
FACTUAL ALLEGATIONS
22
A. Crypto Currency
23
10. Crypto currency isa form of digital currency usi
ng cryptography to
24
secure electronic transacti
onsand to control the creati
on of new virtual currency
25
units.Popular formsof crypto currencyinclude Bi
tcoi
n,Bi
tcoi
n Cash,Peercoi
n and
26
Unobtanium.
27

28

CLASSACTION COMPLAINT 2
Ý¿-» ëæïèó½ªóðéððì ܱ½«³»²¬ ï Ú·´»¼ ïïñïçñïè п¹» ì ±º ïî

1 11. Bitcoin i
sbyfar the most popular form of crypto currencycreated asa
2 new worldwi
de payment system in 2009.In the last several years,Bitcoin has
3 become a preferred currency for many consumersand i
saccepted asa form of
4 payment bymanyonline retai
lersand servi
ce providers.
5 12. Thoughcrypto currencyis the value of a
6 crypto currencyisveryreal.Bitcoin for example tradesin currencymarketsat a rate
7 of 1 Bitcoi
n to approximately$6,
345.
16(last updated November 13,2018).
8 13. The market for crypto currenciesi
sknown to be extremelyvolati
le and
9 subj
ect to mani
pulati
on bylarge playersi
n the market.For example,Defendant has
10 admitted to engagi
ng i
n a practice of destroying virtual currencyfor the
11 purpose of reducing the supply of the currency and raising its value. See
12 https://www.
ccn.
com/bitmain-will-burn-12-of-bi
tcoi
n-cash-tx-fees-calls-on-other-
13 miners-to-follow-sui
t/ Byreduci
ng the total supplyof Bitcoi
n Cashin circulati
on,
14 Bitmain believesthat it can reduce sell pressure on the coi
n,ultimatelymaking i
t
15

16 14. New crypto currency iscreated asa reward for a processknown as


17 mining. virtual currenciesusi
ng computi
ng power to solve
18 complexmathpuzzle.These solutionsare then used to encrypt and secure the crypto
19 currency.The computersor poolsof computerswhich are the first to solve these
20 puzzlesare rewarded withnew crypto currency.
21 15. Once earned,vi
rtual currency isstored i
n a di
gital wallet associated
22 withthe computi
ng devi
ce that solved the puzzle.
23 16. Virtual currency mining i
sa passive process.These math puzzlesare
24 solved bycomputersusi
ng computer power.Theydo not require anycalculationsby
25 the person mi
ning the currency.Ascompeti
tion to create more virtual currencyhas
26 increased,the mathemati
cal puzzleshave become more complex,making virtual
27 currencymore difficult to obtai
n.Computersthat were once capable of effici
ently
28 mining Bi
tcoi
n could now take centuri
esto obtain the same results.
CLASSACTION COMPLAINT 3
Ý¿-» ëæïèó½ªóðéððì ܱ½«³»²¬ ï Ú·´»¼ ïïñïçñïè п¹» ë ±º ïî

1 17. A mining pool i


sthe pooli
ng of resourcesbyvirtual currencyminers,
2 who share their processing power over a network,to spli
t the reward equally,
3 according to the amount of work theycontri
buted to the probabili
tyof solvi
ng the
4 puzzles.Mi
ning i
n poolsdeveloped i
n response to the massi
ve increase i
n difficulty
5 of virtual currencymini
ng.
6 18. Asinterest i
n vi
rtual currencymining hasincreased i
n recent years,so
7 di
d the technology used to mine the currency.Ini
tially,vi
rtual currency was
8 primarily mined by personal computers without any additi
onal hardware.Later,
9 vi
deo graphicscardswere found to solve these mathpuzzlesmore quickly.Finally,
10 dedicated mining devices called ASICs became the standard device for virtual
11 mining.
12 19. ASIC devicescan perform billionsof calculationsper second to tryand
13 crack the cryptographicpuzzle that yi
eldsnew Bitcoins.
14 20. ASIC devices consume so much electri
city that their value to the
15 Indeed,
16 it maytake monthsor yearsto earn back the cost of purchasi
ng and operati
ng an
17 ASIC device i
n virtual currencydepe
18 21. Ascompeti
tion and the technologyto mine virtual currencyimproves,
19 the costi
ng of minti
ng new virtual currency increasestremendously.It hasbeen
20 reported that the cost to mi
ne virtual currencyincreased tenfold between 2016and
21 2017alone.
22 B. Bitmain ASIC Devices
23 22. Founded i
n 2013, Bitmain markets and sells ASIC devices
24 internationally.Far and away,Bitmain dominatesthe ASIC device i
ndustry.
25 23. Bitmain i
salso the largest si
ngle miner of virtual currencyin the world.
26 Bitmain operatesAntpool,the largest Bi
tcoi
n mini
ng pool i
n the world.Defendant i
s
27 also the largest competi
tor to eachof itsASIC device customersbecause it mai
ntains
28 itsown virtual currencymining accounts.
CLASSACTION COMPLAINT 4
Ý¿-» ëæïèó½ªóðéððì ܱ½«³»²¬ ï Ú·´»¼ ïïñïçñïè п¹» ê ±º ïî

1 24.
2 electrici
tycostsare extremelylow,including Russi
a and Inner Mongolia. Bitmain
3 operatesmore than100,
000 ASIC devi
ceson these farms.
4

8
9

10

11

12

13

14
Photo of Bitmain Inner Mongolia Virtual Currency Farm.
15 Reportedly operating 25,000 ASIC devices mining Bitcoin and
other virtual currencies around the clock every day.
16 25.
17 26. Analystsestimate that Bi
tmain made $3 -$4bi
lli
on in operati
ng profi
ts
18 in 2017.
19 27. Defendant marketsand sellsa number of ASIC devicesthat work using
20 the same or similar i
nterface and setupprocedures.
21 At anygiven time,the devicesrange in price based
22 on the speed wi
th whi
ch they can perform
23 calculati
ons.Moreover,because the value of an
24 ASIC devi
ce i
sso closely linked to itsabi
lity to
25 generate vi
rtual currencythroughsheer processi
ng Bitmain Bitcoin Mining Device
26 power, Bi tmain varies the pri ce of its ASIC AntMiner S9
27 devicesbased on the current tradi
ng pri
ce of Bi
tcoi
n,a leadi
ng form of crypto
28 currency.

CLASSACTION COMPLAINT 5
Ý¿-» ëæïèó½ªóðéððì ܱ½«³»²¬ ï Ú·´»¼ ïïñïçñïè п¹» é ±º ïî

1 28. Compared to other computer components,ASIC devicesconsume an


2 enormous amount of energy when operating at full speed. For example,the
3 AntMiner S9pictured above israted at 1375wattsof power,whi
le a standard light
4 bulb i
srated at only 60 to 100 watts.Because of these extremely high operati
ng
5 costs,i
t is necessary to consi
der operating costs and local electricity prices in
6 determini
ng the value of an ASIC devi
ce.
7 29. Bitmain ASIC devicescan often take an extremelylong time to ini
tiate.
8 The i
niti
alizati
on processcan take manyhoursand upto several daysto complete.
9 30. Defendant usesi
ts ASIC devi
cesand customers electri
cal
10 power sourcesto enri
chi
tself at the expensesof itscustomers.
11 31. Until approximately two yearsago,Bi
tmain ASIC devicesstarted i
n
12 low power mode,whi
le the customer linked the device to her virtual currency
13 account.Onlyafter the setupprocesswascomplete,would the devicesfullypower
14 upand channel i
ncoming virtual currency to the virtual currencyaccount.
15 W hile the custumer wasi
nitiati
ng the setupprocedures,the ASIC deviceswere not
16 mining virtual currency for anyone and were not consuming large amounts of
17 electrici
ty. There wasno default account setti
ng to which vi
rtual currency mined
18 duri
ng the setupprocesswasdirected and transferred.
19 32. Recently,Bitmain modified the startupprocedure for i
tsASIC devices
20 suchthat the devi
cesimmediatelystart i
n full power hi
ghenergyconsumption mode
21 before the customers account i
slinked to the device and stayi
n that mode unti
l the
22 setup processi
scomplete.Moreover,the default account setti
ng on the Bitmain
23 ASIC devices
24 server.Asa result of thi
snew practice,Bi
tmain ASIC devicescost more to operate
25 duri
ng the setup phase and transfer virtual currency to Defendant rather than the
26 customers.
27

28

CLASSACTION COMPLAINT 6
Ý¿-» ëæïèó½ªóðéððì ܱ½«³»²¬ ï Ú·´»¼ ïïñïçñïè п¹» è ±º ïî

1 CLASS ACTION ALLEGATIONS


2 33. Plai
ntiff bringsthi
sacti
on asa classacti
on under Federal Rule of Civi
l
3 Procedure 23 on behalf of a Classconsi
sting of all personsi
n the United Stateswho,
4 withi
n the relevant statute of li
mitationsperiod,purchased Bi
tmain ASIC devi
ces.
5 34. Plai
ntiff also seeksto represent a subclassdefined asall membersof the
6 Classwho purchased Bitmain ASIC devices
7

8 35. The Classi


sso numerousthat j
oinder of all membersi
simpracti
cal.On
9 information and beli
ef,the Classincludesmore than one hundred thousand members.
10 36. The Classi
sascertai
nable because the ClassMemberscan be identified
11 byobj
ective cri
teria the purchase of Bitmain ASIC mini
ng devicesduri
ng the Class
12 Peri
od an be i
denti
fied
13 throughreasonable effort
14 37. There are numerousquestionsof law and fact common to the Class
15 whichpredomi
nate over i
ndi
vidual acti
onsor issues,i
ncludi
ng but not limited to:
16 (a) W hether Defendant engaged i
n an unfair busi
nesspractice;
17 (b) W hether Defendant wasunj
ustlyenriched byitsconduct;
18 (c) W hether Defendant converted the use of ASIC devi
cesto i
tsown
19 ends;
20 (d) W hether ClassMemberssuffered an ascertainable lossasa result
21 of Defendant smisrepresentati
ons;and
22 (e) W hether,asa result of Defendant smisconduct asalleged herei
n,
23 Plai
ntiff and the ClassMembersare enti
tled to restituti
on,
24 inj
unctive,monetaryreli
ef and/or ,and if
25 so,the amount and nature of suchrelief.
26 38. Plai
ntiff sclaimsare typical of the claimsof the membersof the Class
27 asall membersof the Classare similarlyaffected byDefendant swrongful conduct.
28 Plai
ntiff hasno i
nterestsantagonisticto the interestsof the other membersof the
CLASSACTION COMPLAINT 7
Ý¿-» ëæïèó½ªóðéððì ܱ½«³»²¬ ï Ú·´»¼ ïïñïçñïè п¹» ç ±º ïî

1 Class.Plai
ntiff and all membersof the Classhave sustained economicinj
uryari
sing
2 out of Defendant svi
olationsof common and statutorylaw asalleged herei
n.
3 39. Plai
ntiff i
san adequate representati
ve of the Classbecause hisi
nterests
4 do not conflict withthe i
nterestsof the ClassMembershe seeksto represent,he has
5 retained counsel competent and experienced i
n prosecuti
ng classactions,and he
6 intendsto prosecute thi
sacti
on vigorously.The i
nterestsof the ClassMemberswi
ll
7 be fairlyand adequatelyprotected byPlainti
ff and hiscounsel.
8 40. The classmechani
sm i
ssuperior to other avai
lable meansfor the fair
9 and effi
cient adj
udicati
on of the claimsof Plai
ntiff and the ClassMembers.
10

11 First Cause of Action


12 Violation of the
13 By California Class Against All Defendants
14 41. Plai
ntiff repeatsthe allegati
onscontai
ned i
n the paragraphsabove asif
15 fullyset forthherein.
16 42. Plai
ntiff bringsthi
sCount on behalf of the California Subclass.
17 43. The UCL,Bus.& Prof.Code §17200 et seq.,provi
des,i
n perti
nent
18
19 businesspracti
cesand unfair
20 44. Defendant their conduct
21 issubstantiallyinj
uri
ousto customers,offendspublicpolicy,and isimmoral,
22 unethi
cal,oppressi
ve,and unscrupulous,asthe gravi
tyof the conduct outwei
ghsany
23 alleged benefi
ts.Defendant sconduct i
sunfair in that the harm to Plai
ntiff and the
24 Classari
sing from Defendant sconduct outweighsthe uti
lity,if any,of those
25 practi
ces.
26 45. Defendant spracticesasdescribed herei
n are of no benefi
t to consumers
27 who are tri
cked into mining vi
rtual currencyfor the benefi
t of Bitmain i
nstead of
28 themselves.
CLASSACTION COMPLAINT 8
Ý¿-» ëæïèó½ªóðéððì ܱ½«³»²¬ ï Ú·´»¼ ïïñïçñïè п¹» ï𠱺 ïî

1 46. Asa di
rect and proxi
mate result of these acts, have
2 been and are being harmed.Plai
ntiff and membersof the Classhave suffered i
njury
3 and actual out-of-pocket lossesasa result of Defendant s
4 vi
olati
on because Bi
tmain used
5 incur operati
ng expenseswhile mini
ng virtual currencynot for thei
r own benefit,but
6 for the benefi
t of Bi
tmain.
7 47. Pursuant to Bus.& Prof.Code §17203,Plaintiff,and the California
8 Classare therefore enti
tled to: (a)an order requiri
ng Defendant to cease the actsof
9 unfair competi
tion alleged herei
n;(b)full resti
tution of all expensesincurred asa
10 result of unfair and decepti
ve practi
ces;(c)interest at the hi
ghest rate
11 allowable bylaw;a
12 pursuant to,inter alia,Californi
a Code of Civi
l Procedure §1021.
5.
13

14 Second Cause of Action


15 Unjust Enrichment
16 Against All Defendants
17 48. Plai
ntiff repeatsand reallegesthe foregoi
ng paragraphs.
18 49. Plai
ntiff bri
ngsthi
sclai
m on behalf of the classagainst all Defendants.
19 Defendant hasbeen unj
ustlyenrichment bythe conduct descri
bed above.
20 50. Unj
ust enrichment requiresthe recei
pt of a benefi
t and unj
ust retenti
on
21 of the benefi
t at the expense of another.
22 51. Defendant received the benefi
t of classmemberscomputer power while
23 the operati
ng expenses,i
ncluding electrici
ty fell on Class members rather than
24 Defendant.
25 52. Defendant should be required to disgorge all monies,profi
tsand gains
26 which it hasobtai
ned and wi
ll unj
ustly obtain at the expense of Plai
ntiff and the
27 Classand reimburse Plai
ntiff and the classfor the operati
ng expensesof their ASIC
28

CLASSACTION COMPLAINT 9
Ý¿-» ëæïèó½ªóðéððì ܱ½«³»²¬ ï Ú·´»¼ ïïñïçñïè п¹» ïï ±º ïî

1 devices
2 ASIC devices.
3 Third Cause of Action
4 Conversion
5 Against All Defendants
6 53. Plai
ntiff repeatsand reallegesthe foregoi
ng paragraphs.
7 54. Plai
ntiff bri
ngsthi
sclai
m on behalf of the classagainst all Defendants.
8 Defendant hasconverted the use of Plai
ntiff
9 55. Defendant should be required to disgorge all monies,profi
tsand against
10 whichi
t hasobtai
ned from the conversi
on and reimburse Plai
ntiff and other Class
11 membersfor the operati
ng expensesof their ASIC devi
cesduring the time in which
12 Defendant received benefitsfrom Classmembers.
13

14 WHEREFORE,Plai
ntiff praysfor reli
ef and j
udgment,asfollows:
15 A. Determini
ng that thisaction i
sa proper classacti
on;
16 B. For an order declaring that the Defendant sconduct vi
olatesthe statutes
17 and common law clai
msreferenced herei
n;
18 C. Awardi
ng resti
tution,compensatorydamagesand/or di
sgorgement i
n
19 favor of Plaintiff,membersof the Class,and the Cali
fornia Classagainst Defendant
20 for all harm suffered asa result of Defendant swrongdoing,i
n an amount to be
21 proven at trial,including i
nterest thereon;
22 D. Awardi
ng i
njunctive relief agai
nst Defendant to prevent Defendant
23 from continuing their ongoi
ng unfai
r,unconsci
onable,and/or decepti
ve actsand
24 practi
ces;
25 E. For an order of restitution and/or di
sgorgement and all other formsof
26 equi
table monetaryrelief;
27 F. Awardi
ng Plaintiff and membersthe Classtheir reasonable costsand
28 expensesi
ncurred i
n thi
sacti
on,includi
ng counsel feesand expert fees;and
CLASSACTION COMPLAINT 10
Ý¿-» ëæïèó½ªóðéððì ܱ½«³»²¬ ï Ú·´»¼ ïïñïçñïè п¹» ïî ±º ïî

1 G. Awardi
ng suchother and further reli
ef asthe Court maydeem just and
2 proper.
3 JURY DEMAND
4 Plai
ntiff herebydemandsa trial byj
uryon all claimsso triable i
n thi
sacti
on.
5

6 Dated: November 19,2018 FRONTIER LAW CENTER


7 /s/ Karo Karapetyan
8 Robert Starr (183052)
Adam Rose (210880)
9 Karo Karapetyan (318101)
23901 CalabasasRd,Sui te 2074
10 Calabasas,CA 91302
Telephone: (818)914-3433
11
Facsimile: (818)914-3433
12 E-Mai l: robert@ frontierlawcenter.
com
adam@ frontierlawcenter. com
13
karo@ frontierlawcenter.com
14
Attorneysfor Plai
ntiff
15

16

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19

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CLASSACTION COMPLAINT 11