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Kerrisdale Capital Raises Concerns About Riot Blockchain’s Operations
Kerrisdale Capital, an investment firm, has lodged a complaint with Texas officials regarding safety hazards and equipment concerns at Riot Blockchain, a crypto mining company. The complaint, detailed in a letter addressed to Navarro County Texas Judge H.M. Davenport Jr. and four commissioners on June 5, highlighted issues raised by a former operations specialist at Riot’s Rockdale facility.
The specialist described dangerous spills, unsafe electrical equipment, and a lack of protective gear usage at the facility. Furthermore, the former employee claimed that management disregarded his safety concerns, creating a potentially hazardous work environment.
One of the key concerns raised by Kerrisdale was Riot’s use of ExxonMobile’s Spectrasyn 2C as an immersion coolant in 2022, a product not listed for data center use by ExxonMobile. The firm urged officials to investigate the coolant currently employed at Riot’s Rockdale and Corsicana centers, considering the safety implications.
Questionable US Manufacturing Claims
Additionally, Kerrisdale pointed out discrepancies in Riot’s $453 million purchase agreement for mining equipment from the Chinese manufacturer MicroBT. While Riot suggested the deal would create jobs in Pennsylvania by manufacturing the mining devices locally, Kerrisdale’s investigation revealed that the US facilities merely assembled parts imported from China.
Moreover, Kerrisdale highlighted that MicroBT’s US manufacturer, Synos Corp., operates with a highly automated process that requires few skilled workers, casting doubt on Riot’s job creation claims. The firm accused MicroBT of utilizing Synos to avoid import tariffs rather than genuinely supporting US employment.
Kerrisdale disclosed a conflict of interest in the matter, acknowledging its short position on Riot’s stock, indicating that it would benefit from a decrease in Riot’s stock value.
Concerns About Bitcoin Mining and Texas Energy Grid
In a separate report, Kerrisdale criticized Bitcoin mining as “easily among the worst business models” and claimed that Riot has never generated positive cash flows. The firm also expressed concerns about the strain Bitcoin mining places on the Texas electrical grid, particularly during periods of high demand.
“We believe Riot investors are oblivious to shifts in state and local politics and headline risk as we approach another summer which will test Texas’ fragile electric grid,”
Kerrisdale’s report referenced a Dallas Morning News article predicting increased electricity demand during the summer, which could lead to higher prices. This issue adds to the ongoing debate surrounding energy consumption and environmental impact associated with cryptocurrency mining.
Earlier this year, Texas faced another energy-related challenge when the Texas Blockchain Council (TBC) and Riot contested an executive order mandating detailed energy use reporting for mining firms nationwide. While the survey was largely halted by government agencies in March, the incident underscores the regulatory complexities surrounding crypto mining operations.
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