Kentucky State Senator Sued Over Bitcoin Mining Business

Kentucky Sen. Brandon Smith (R-Hazard) is facing two separate legal cases related to a Bitcoin mining repair business he founded in Letcher County, Kentucky.

Smith is the CEO and co-founder of Mohawk Energy, which in 2022 pivoted from coal cleanup operations to ASIC repair and other Bitcoin mining services.

Local outlet, Lexington Herald Leader, reports that Ricky Dale Cole sued Smith in Letcher Circuit Court in January, accusing the lawmaker of misrepresenting the value of Mohawk Energy.

Cole claims that he sold a warehouse to Mohawk, agreeing with Smith to sell the premises below market price in return for a 20% stake in the business.

Yet Cole’s suit alleges that the company has refused to share info about its finances and that he has not profited from the deal. He also alleged that Smith made false promises and representations.

This suit comes in addition to a case filed in November 2023 by Huobi-subsidiary HBTPower, which alleges breach of contract and misrepresentation, following an agreement with Mohawk Energy in June 2022.

According to HBT’s allegations, Smith had made a deal to work with HBTPower employees to train his own workers and acquire the in-house ability to repair Bitcoin mining machines.

However, Smith and other Mohawk representatives eventually asked HBTPower personnel to leave Mohawk’s premises, with HBTPower claiming that Smith did not own the warehouse at the time he entered into a contract with the Chinese company.

Smith has denied the allegations against him, and has filed counterclaims against both plaintiffs.

Despite the legal difficulties surrounding Mohawk’s pivot to crypto, Smith remains optimistic about the industry’s future in the US and in Kentucky.

Smith had been instrumental in securing the passage of several crypto-related bills in Kentucky, including a 2021 bill—which he authored—that provides tax incentives for investments in cryptocurrency mining.

Speaking to Decrypt in his capacity as Mohawk Energy CEO, Smith said that the company is “excited” to return to its mission of “job creation and training” once the litigation is over.

“While it is unfortunate that Huobi and its shell subsidiary HBTPower breached their eight year contract and refused to start operating at the Mohawk plant, that does not impact Mohawk’s long term plans to bring more jobs and technology training to the region,” he said. “Our counter suits to the complaints explain our position.”

Mohawk’s difficult pivot came during a period when the U.S. cryptocurrency mining sector witnessed rapid expansion, with Bitcoin mining sites in the U.S. increasing in number by 23% between 2022 and 2024, to 48.

According to Shanon Squires, the Chief Mining Officer at Compass Mining, such growth has continued this year, as evidenced by Bitcoin’s hashrate reaching new all-time highs recently.

“In the U.S., that momentum is especially visible in states like Texas and Wyoming,” she told Decrypt. “The expansion seems to be mostly coming from existing companies, rather than from new players entering the market.”

While affirming that the American cryptomining industry has become increasingly professionalized in recent years, there is still some degree of variability, with some endeavors “popping up and fading” quicker than others.

She added, “While Bitcoin mining is no longer the ‘wild west’ it once was, companies still need to do their homework and work with established partners that have proven themselves through multiple cycles.”