Lawsuit Filed Against a Bitcoin Mine in Texas Shows Links to China: NYT

• Texas and other US states have welcomed cryptocurrency miners.
• In 2021, China banned crypto miners, and some of these seem to have moved to the US.
• A New York Times report shows the difficulties of tracking international investment in the industry.

After China banned all crypto transactions and mining in September 2021, bitcoin mining companies increasingly turned to places like rural parts of Nebraska, Wyoming, and especially Texas.

Recent reporting by The New York Times suggests these crypto mines are leading to some worrying socio-economic implications.

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A bitcoin mine in the 281-person town of Channing, Texas, is being sued for allegedly not paying workers. BitRush, also known as BytesRush, is owned by a 23-year-old NYU student, Jerry Yu, a Chinese citizen and US resident.

Crypton Mining Solutions, another Texas-based crypto mining company, is also suing BitRush for failing to pay it for services.

The lawsuits have shed light on documents illustrating how Chinese investors have flocked to the US, spending hundreds of millions of dollars to build and run crypto mines, according to the Times.

Thanks to its cheap energy and crypto-friendly legislation, Texas has become a hub for cryptocurrency mining facilities: large warehouses full of computers “mining” digital currency like bitcoin around the clock.

Chinese investors who set up operations in the US can use these mines to generate crypto and then exchange it for dollars online.

The mines and equipment are often purchased using cryptocurrency, making the origins of these funds impossible to trace, according to the Times, which added that the lack of visibility allows investors to bypass oversight by US regulators and restrictions on money leaving China.

In the lawsuit, Crypton Mining Solutions accused Bitrush investors of being “not only Chinese citizens, but citizens in highly political and influential business positions,” the Times reported.

Yu deferred to his lawyer for comment, who told the Times via email that the claims against him were “baseless.”

However, further investigation by the newspaper showed that individuals who signed the mortgage on Yu’s Manhattan apartment matched the names of a married couple who own shares in Chinese companies worth more than $100 million.

Documents procured by the Times suggest that the pair, Yu Hao and Sun Xiaoying, potentially Yu’s parents, could also be investors in and directors at BitRush.

Yu’s lawyer would not confirm to the Times the relationship of these individuals to Yu, or the identities of shareholders.

The flow of cash from Chinese businesses and citizens into these companies cannot be traced as they happened via crypto transactions which did not have to comply with US regulations at the time, the Times reported.

This is not the first time a crypto mining company has come under the microscope for its connection to China and the potential security risks.

Pentagon officials began monitoring a bitcoin operation in Wyoming in October. The mines’s owners’ ties to China pose a national security threat, per The New York Times.

The mine is located across from a Microsoft data center and a nearby military base.

In September 2022 the White House released a statement saying the US now had the largest bitcoin mining industry in the world and was responsible for 38% of global bitcoin activity, a 34.5% increase from 2020.