Investors who bet big on self-described bitcoin mining mogul Malachi Salcido are now claiming the man from Washington state has gone bankrupt and possibly cost them millions of dollars.
Investor group that invested $ 8.5 million in Salcido’s bitcoin mining company StepChange claims Wenatchee man embezzled, embezzled or otherwise spent $ 2.4 million in company money over three years. In a bitcoin mine he owns, Salcido charged StepChange – a company in which he had a majority stake – rents over nine times what he was paying on the mortgage.
Earlier this month, investors sued Salcido and its companies in an attempt to get some of their money back and force detailed expense accounting from StepChange, said Susan Preston of Seattle Angel Fund, a capital firm. Seattle risk who was one of the biggest investors. as part of StepChange’s Series A funding cycle at the end of 2017.
“Management and transparency to shareholders has been abandoned and lost,” Preston said.
A spokesperson for Salcido Enterprises said the company was “committed to maintaining sound, legal and ethical business practices” and denied breaking any agreements with investors.
“We have followed the guidelines specified in all formal agreements and have provided documentation and disclosure information in accordance with SEC requirements,” the spokesperson said via email. “We dispute the allegations, we remain committed to our values and we hope to resolve this issue quickly.”
An engineer by training, Salcido, 46, entered the bitcoin business in 2013. In 2018, he claimed to control around 4% of global mining capacity and had been featured on CNBC and elsewhere as the poster for the “bitcoin gold rush”. In a rural America rich in energy. He posed for photos in December with U.S. Rep. Kim Schrier at a mealworm farm heated by StepChange bitcoin mining servers.
Bitcoin miners like Salcido operate data centers dedicated to managing the flow of cryptocurrency. The process consumes a lot of power and requires a lot of computing power, but the miners are reimbursed with newly created bitcoins and via fees.
In the lawsuit, Salcido’s investors claim that it significantly inflated StepChange’s spending on personnel and property, to their detriment.
As of July 2018, Salcido was charging $ 57,000 per month in management fees to the company’s accounts, according to the lawsuit, well above the rate of $ 16,500 per month that Salcido investors claim to have been appropriated.
These accusations and a host of others have been covered up by a network of mixed bank accounts, false invoices and false accounting records created to cover up “mismanagement, fraudulent accounting, embezzlement, proprietary trading and breaches of fiduciary duties, ”argued investor lawyers in the lawsuit, which was filed on March 1 in Washington state court.
Investors – a group that includes funds and individuals in Luxembourg, Sweden and Seattle – say Salcido overcharged the rent for two data centers used in Bitcoin mining.
Salcido drew $ 16,500 per month to rent a property he owned on which his mortgage payment was $ 1,823 per month, according to the lawsuit. Investors claim that Salcido then took a strange legal action – he kicked out StepChange.
Lawyers for Salcido’s core business, Salcido Enterprises, filed an illegal action against StepChange in 2020, claiming StepChange owed $ 439,250 in arrears of rent on an East Wenatchee data center, according to the lawsuit. StepChange, which Salcido also controlled, did not respond to the lawsuit and lost by default.
At a second data center in a business park in East Wenatchee, Salcido billed $ 13,900 per month for a property he was renting for $ 4,250 per month, according to the lawsuit.
Investors argue that Salcido failed to notify them of the nearly half a million dollar judgment. This, they say, is one of many instances in which he refused to share crucial information with them.
According to the lawsuit, Salcido did not disclose that investors’ money would be used to pay $ 807,211 to cover costs owed to two other companies. Lawyers for the investors argue that the money was added to independent invoices covering the costs of building the second data center.
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Payments have been made to both companies, one of which is currently suing StepChange. Investors claim that Salcido kept this 2018 lawsuit hidden from them even though he was spending hundreds of thousands of dollars to fight it. Presented by a consultant, the lawsuit, which remains unresolved, argues that Salcido did not pay finder’s fees.
Salcido also allegedly failed to tell investors he owned a property that StepChange spent $ 209,556 on development, an omission that investor lawyers claim was a personal transaction.
Investors have requested that StepChange be placed in receivership so that a detailed review of its books can be carried out without Salcido’s intervention. They claim that they also receive compensation for what they describe as false claims aimed at earning their investments.
“Our immediate goal is for an independent third party receiver to take control of the operations of the company under court oversight in order to conduct a thorough analysis and restore the operations of the company in accordance with the rights and expectations of shareholders,” said Preston from the Seattle Angel Fund via email.
Salcido has yet to respond to the lawsuit in Chelan County Superior Court. A company spokesperson declined to answer detailed questions about the allegations.
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