Bitcoin miner facing financial woes as Limestone lawsuit settlement still incomplete | WJHL

LIMESTONE, Tenn. (WJHL) — It was June 9 when Bitcoin miner GRIID’s CEO Trey Kelly personally spoke to Washington County residents angered about a noisy Bitcoin mine in Limestone. That night, after grilling Kelly and extracting multiple concessions, county commissioners agreed to terms settling their lawsuit against GRIID subsidiary Red Dog Technology and local utility BrightRidge.

News Channel 11 has learned that was also the date GRIID received its first letter from its creditor, Blockchain Access UK Limited, claiming GRIID had defaulted on its credit agreement with Blockchain.

 “If GRIID is unable to resolve its dispute with Blockchain or secure additional new financing, it will be likely unable to repay the amounts due and payable under the credit agreement, which would likely render it insolvent and likely result in a bankruptcy filing…” reads a Securities and Exchange Commission filing from a company that has been set to take GRIID public since last November.

Referring to that June 9 negotiation, Tim Hylton, who lives just uphill from the mine, told News Channel 11 Thursday, “it was a done deal as far as I was concerned.”

Three months have passed since the sides negotiated an agreement that even county commissioners thought was final pending the BrightRidge board’s assent, which came June 10. In it, GRIID would purchase 5 acres at the Washington County Industrial Park, build a new (and Kelly said quieter) mine there, and depart Limestone for good no later than the end of 2024 but likely much sooner.

The company would also pay Washington County $500 a day retroactive to September, 2021 — which was when the county ordered BrightRidge to shut the mine down due to an alleged zoning violation — and up until the mine closed in Limestone.

Commissioners soon learned a “final final” version needed to be completed by attorneys for both sides in the suit, which alleged that the mine violated the county’s A-3 zoning ordinance and that it opened without getting a permit. County Attorney Allyson Wilkinson has told commissioners she provided GRIID representatives details on what the county needs from them, including a specific site at the industrial park, by late June.

Several commissioners told News Channel 11 that as of mid-September, they hadn’t received anything to run back through a committee and on to the full commission for an up or down vote.

Meanwhile, the noisy fans cooling high-powered, energy hungry computers at Red Dog’s Limestone mine continue their dull roar, which came in at 50 decibels on Hylton’s decibel meter this week. Those computers perform highly complex equations in an effort to “unearth” the digital cryptocurrency Bitcoin, and to verify Bitcoin transactions. They use massive amounts of power, in this case sold by BrightRidge, which leases GRIID the property next to its Bailey Bridge Road substation.

“Not much we can do,” Hylton said Thursday, standing at the edge of his property with bright purple ironweed flowers blooming just behind him and the mine site, surrounded by sound-reducing fencing but still emitting a constant and very noticeable noise, a couple hundred yards further in the background.

“We’re just waiting on them to get settled and hoping the sound will go away and our lives become what they were before it got here.”

The Hyltons can always hear the mine on the back side of their home, which sits atop a heavily wooded ridge.

“We always go to the front to stay away from the sound,” he said. “It’s just a constant roar, and something that’s not natural to this area. You know, we hear tractors, we have cars go up and down the road, but they come and go. This never stops.”

BrightRidge, the original defendant in a lawsuit filed in November 2021 after it refused to shut GRIID’s mine down, has begun providing free fiber internet to some households near the mine as agreed in the tentative settlement. GRIID later became an additional defendant in the case under Red Dog’s name.

“The new broadband is wonderful,” Hylton said, adding that he and his wife were able to flip the switch about three weeks ago from slow and spotty DSL internet, which was all he and many neighbors in this rural section of the county had available.

“They’ve done a really good job and it’s really fast — way better than I actually thought it would be,” Hylton said up at his home as a speed test showed his tablet with very fast upload speeds of close to 400 megabytes per second.

GRIID’s restrictive credit agreement

But while BrightRidge proactively set to work on its primary offer in the settlement, GRIID lawyers haven’t returned required materials that would allow the county commission — now with seven of its 15 members changed since the August election — to vote again whether to finalize the settlement. The suit is still active pending finalization of the settlement and commissioners could opt for a jury trial, which was set for July but averted when the sides reached their not-quite-final deal in June.

Judging by the “Risk Factors” section in a quarterly Securities and Exchange Commission (SEC) report by the shell company that announced late last year it would take GRIID public, creating a $3 billion company, GRIID’s legal counsel may have other fish to fry.

The second-quarter report from Adit Edtech, a “Special Purpose Acquisition Company” formed expressly to take GRIID public, was filed Aug. 15. It says Blockchain, whose “Third Amended and Restated Credit Agreement” with GRIID provided a line of up to $525 million, “asserted an alleged event of default” and gave notice it would seek to force accelerated repayment from GRIID.

The exact amount GRIID owed Blockchain at that time isn’t revealed in any of the documents that are public, but another Adit Edtech SEC filing from March 22 does show that GRIID had an “accumulated deficit” of $24.6 million as of Dec. 31, 2021.

That same March filing, also under the “Risk Factors” section, speaks of covenants in its credit agreement that “impose significant operating and financial restrictions on GRIID.” The financing also required GRIID “to maintain specified financial ratios and satisfy other financial condition tests.”

The March filing also gave a hint that Blockchain itself could someday wind up with the Limestone facility in its hands.

“… if GRIID were unable to repay the amounts due and payable under the credit agreement, the lenders could proceed against the collateral securing the debt,” the filing reads.

The more recent SEC filing says GRIID received letters June 9 and 11 from Blockchain, then “rejected Blockchain’s assertions” on June 12.

However, the section continues, saying GRIID “is in discussion with Blockchain regarding these issues” and is also in discussions with other lenders. At the time of the filing, it was “unclear whether any additional financing will be consummated.”

A filing from this week does show that Adit EdTech and GRIID have found a company interested in buying up to $200 million of GRIID shares if the merger occurs and the company does go public.

News Channel 11 emailed Trey Kelly Sept. 13 asking whether the issues had been resolved, but has not received a reply. A similar email to Adit Edtech’s CFO has also gone unanswered.

Back in Limestone, Hylton said he doesn’t know quite what to make of the new revelations.

“We were just real happy we had some kind of resolution, or thought we did.”

As for GRIID, “I don’t want to see anything bad happen to anybody, as far as financially. I just want them to go away from me.”

Hylton said he’s been pleased with BrightRidge’s responsiveness since the mine went in, and not just because of the BrightRidge internet, which the agreement said would be free until the mine was gone.

“They’ve been pretty diligent taking sound readings, and if I call to ask about anything they’re always Johnny on the Spot,” he said of the utility. “They’ve been very cooperative as far as helping me understand what’s going on.”

He doesn’t give BrightRidge a complete pass, though, believing they missed early opportunities — in 2020, as they sought a rezoning — to be transparent about plans for the property.

“I contacted the person who used to own the property before BrightRidge bought it,” Hylton said of extra acreage around the substation that BrightRidge purchased in January 2020, a month before the rezoning.

“He had been told it was going to be a solar farm or a communications center. So we all thought in the community, we were hoping for a solar farm, but a communications center would have been just as well. We had no idea we were going to get into what we have.”

He said if the possibility of a Bitcoin mine had been mentioned, “we would have researched it, and we would have known what was coming.”

Instead, the tight-knit community finds itself still in limbo, uncertain whether the mine will move eventually as a result of a final settlement agreement — likely bringing opposition in Telford, where the new one would be built — or whether the lawsuit will proceed to a jury trial.

That’s something that could take even longer to work its way through the courts, provided GRIID remains a going concern and has the resources for a protracted court battle.

The earliest the Washington County Commission could consider a settlement, should an agreement come across Wilkinson’s desk, would be at its October meeting.