No byte-sized lawsuit: Dickinson company alleged to be unlawfully withholding $4.7 million in assets
Chicago based cryptocurrency company, EZ Blockchain, filed a lawsuit against Bakken-based oil and gas company, Blaise Energy Power, Inc. and its Dickinson owner, on Feb. 8 in the U.S. District Court of North Dakota.
DICKINSON — A Dickinson man and his company will have their day in U.S. District Court to dispute the allegations levied in a lawsuit brought by a Chicago based mobile Blockchain infrastructure limited liability company. According to court documents obtained by The Press, Mark Wald, of Dickinson, is alleged to be unlawfully holding $4.7 million in equipment owned by the Chicago entity.
The lawsuit was filed by EZ Blockchain, LLC; on behalf of Sergii Gerasymovych and Vlad Rodinoff, against the Bakken-based, Blaise Energy Power, Inc. and owner Wald on Feb. 7 in the United States District Court for the District of North Dakota.
The Chicago based cryptocurrency business claims, in a 33 page filing, that their property is being unlawfully held, valued at $4.7 million, as collateral for $70,000 in unrelated service fees on a project that was subsequently canceled.
The litigation has been docketed in federal court, as the opposing parties reside in different states and the monetary value of the alleged damages exceed $75,000.
Cryptocurrency is a digital form of currency which is almost impossible to counterfeit and often difficult for governments to regulate because it is so heavily encrypted and decentralized. Blockchains are networks of computers that record transactions in the crypto-sphere. The aforementioned legal documents filed by EZ Blockchain’s Attorneys Michael Kozlowski of Chicago and Timothy Purdon of Bismarck detail how the system works in further detail.
“Put simply, the process of generating cryptocurrency, referred to in the industry as ‘mining’, consists of computers (referred to ‘miners’), typically working together, processing large amounts of data to solve complex mathematical operations to validate cryptocurrency transactions and record them on a blockchain. The first computer (i.e., miner) to solve the problem presented by the blockchain receives the next block of cryptocurrency and the process begins again,” the document stated. “EZ Blockchain manufactures, sells and operates mobile data centers which are used to house and run the miners so that they can mine cryptocurrency.”
This demands advanced hardware, as each miner costs up to $10,000 and hundreds are required to run a worthwhile operation. Special facilities are necessary to keep the equipment from overheating. The miners require large quantities of electricity so they can run non-stop.
Making the data centers mobile has provided new opportunities for crypto-miners to fuel their operations, including the use of unwanted natural gas produced during oil extraction. Most areas of southwest North Dakota lack the infrastructure required to profitably trap and transport this gas, and thus it is often burned or “flared” to reduce methane emissions. Each data center can process up to 2.5 megawatts of electricity at a time and hold up to 768 miners. For context, the average American home uses 10,715 kilowatthours (kWh), an average of about 893 kWh per month.
In Sept. 2021, Blaise Energy entered into a contract with EZ Blockchain to provide a minimum of 52.4 megawatts of power, per day, at a Bowline Energy oil well site named Triangle Rooster in McKenzie County, North Dakota.
The plaintiffs allege that Blaise never supplied even half the contracted amount and conducted faulty electrical work. They further claim that Blaise violated its contract in failing to service the generators with routine maintenance, including they had enough oil needed to operate. The suit further alleges that Blaise neglected to install a common distribution panel needed to collect and transfer energy from multiple generators, and instead wired all generators directly to the data center.
On Oct. 7, EZ Blockchain agreed to allow Blaise to facilitate a storage arrangement with Hauck Sales & Services LLC for 672 of its miners in anticipation of a second project, while the other 768 would be housed at the Triangle Rooster. Blaise sent invoices for storage costs, which EZ Blockchain claims to have paid in full and on time.
According to the court filing, Wald contacted EZ Blockchain's CEO Sergii Gerasymovych on Dec. 22 to say that he was canceling the Bowline project and admitted his company’s failure to fulfill contractual duties. Wald also sent him an email declaring Blaise’s intentions to “move out of the generator business.” Yet Blaise maintains that, per the contract, they are still owed $70,000.
On Jan. 19, EZ Blockchain dispatched an employee to Dickinson — where hundreds of the miners were still located outside Blaise’s shop — and while conducting inventory and preparing for shipment, Mark Wald took a pallet of the miners and placed them in his shop. The company informed Wald that they would be coming to retrieve their property at 9 a.m. on Jan. 21, at which time Blaise’s entrance was blocked with a pickup truck.
On Feb. 2, Blaise sent a notice to EZ Blockchain stating that if it does not receive the $70,000 within 15 days, the miners would be sold to recoup costs.
Lawyers for EZ Blockchain say that their security interest in the miners, which are owned by its customers, leaves them no other option than to request an injunction and court order to Blaise Energy to surrender possession of the miners. Further, they are seeking a monetary judgment to compensate for damages and attorney fees.
Attempts by The Press to contact Blaise Energy were unsuccessful, including attempts to reach the company via email and by phone for comment.