Ouyin Tech Capital Files Fraud Suit Against Silvergate Blockchain and Others for Misappropriating $705K Bitcoin Mining Investment

News | June 28, 2024 By:

On Sunday, June 16, 2024, Ouyin Tech Capital filed a civil lawsuit against Silvergate Blockchain, RHY Block Chain, Ming Zhou, Yong Liu, and Paul Liu in the United States District Court for the District of New Jersey.

According to the complaint, Ouyin Tech Capital is a limited liability company based in New York that invests in cryptocurrency and blockchain projects. The defendants are two limited liability companies, Silvergate Blockchain and RHY Block Chain, which are registered in Nevada, as well as three individuals – Ming Zhou, Yong Liu, and Paul Liu, who all reside in New Jersey.

The lawsuit alleges that in late 2021, Zhou and Liu persuaded Ouyin Tech Capital to invest in cryptocurrency mining facility construction projects being developed by Silvergate Blockchain and RHY Block Chain. Specifically, the projects involved building facilities in North Carolina, New Jersey, and Texas to house crypto mining rigs that would generate digital currencies like bitcoin through verifying transactions on decentralized public ledgers known as blockchains.

Ouyin Tech Capital claims it entered into an investment agreement with RHY Block Chain in December 2021 where it agreed to invest a total of $705,000 to acquire a 15% stake in the North Carolina and New Jersey projects. The complaint states that under the terms of the deal, the facilities would be operational by March 2022 and Ouyin Tech Capital’s investment would earn an annual dividend of at least 20%.

However, the lawsuit alleges that none of the defendants made any real efforts to initiate or execute the projects. It further claims that instead of using the funds for their intended purposes, the defendants misappropriated the money for other companies or personal use. When Ouyin Tech Capital demanded the return of its investment in June 2022, the defendants only agreed to repay half the amount but did not follow through.

The complaint accuses the defendants of securities fraud, common law fraud, negligent misrepresentation, breach of contract, unjust enrichment, racketeering, and other violations. It states that the defendants made numerous false statements about the projects’ scope, viability, and expected returns in order to induce the investment. Ouyin Tech Capital is seeking over $705,000 in damages plus interest, legal costs, and other remedies.

In addition to the core allegations, the lawsuit aims to pierce the corporate veils of Silvergate Blockchain and RHY Block Chain by arguing they were inadequately capitalized shells dominated by the individual defendants for fraudulent purposes. It also calls for any subsequent transfers of funds by the defendants to be declared void as an attempt to conceal assets from creditors.

Please contact BlockTribune for access to a copy of this filing.