Former creditors of defunct Compute North are suing the company’s c-suite for alleged malfeasance and breach of fiduciary duty, documents from the United States Bankruptcy Court for the Southern District of Texas reveal.
The creditors are bringing the case against Compute North’s CEO and co-founder David Perrill, Co-founder and Chairman Peter Lee, President Marshall Johnson, and others for breach of fiduciary duties and waste, unjust enrichment, and fraudulent transfers, among other charges.
“We believe the lawsuit filed by the Compute North estate and trust is baseless. We deny all material allegations regarding any alleged wrongdoing and plan to vigorously defend the action,” David Perrill wrote in a statement to Blockspace.
To build their case, the plaintiffs cite reckless purchase orders with container manufacturers, risky financing agreements, inexperienced hires, lack of risk management, use of non generally accepted accounting standards, self-enrichment, inappropriate use of company funds, and failure to safeguard company assets.
“Problems befell Compute North when Defendants prioritized rapidly increasing the size of the company and preparing it for an initial public offering (“IPO”) in the hopes of reaping personal profits over the best interest of the company. Defendants promulgated a “Lets F*cking Go” culture, engaging in reckless actions that were not in the best interest of Compute North and ultimately jeopardizing the very survival of Compute North,” the court filing reads.
Compute North filed for Chapter 11 bankruptcy in September 2022. At the time, it was the second largest bitcoin mining hosting provider in the United States, servicing some 84 entities with a total of $700 million worth of equipment under its care. The Chapter 11 case closed on September 23, 2023, but a handful of creditors are bringing this case against Compute North’s former executives in a bid for additional compensation.
The plaintiffs reference $246 million of Compute North’s former debt as a major factor of the mismanagement. This figure includes loans that the company drew up to the eleventh hour before its bankruptcy and a $113.8 million note with Generate Capital collateralized by its two largest facilities, Kearney and Wolf Hollow. They also mention an $86 million bitcoin mining container purchase deal, which Compute North allegedly purchased before having a site to place them, as another key piece of mismanagement.
The suit also takes aim at executive compensation and Perrill’s spending habits. According to the court document, executive officers received over $1 million in bonuses between January 2022 and the petition date of the bankruptcy in September of the same year, including $300,000 to Perrill. Creditors also allege Perrill charged $986,000 of extraneous purchases to the company, including multiple visits to nightclubs, lavish restaurants, and strip clubs in Miami, New York, Switzerland, and France.
For relief, the creditors are seeking “compensatory damages in an amount to be determined at trial,” plus remuneration (with interest) from Perrill for any charges he made to the Compute North company credit card from January 2021 to April 2022.
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