Kentucky Senator Faces Lawsuits Over Bitcoin Mining Business

Republican Kentucky Senator Brandon Smith, who authored the state’s 2021 cryptocurrency mining tax incentive bill, now confronts serious legal allegations regarding his own Bitcoin mining repair business, Mohawk Energy. The company, which pivoted from coal cleanup operations to ASIC repair and Bitcoin mining services in 2022, faces two separate lawsuits that question both its business practices and representations. Local businessman Ricky Dale Cole initiated the first case in Letcher Circuit Court in January, alleging that Smith misrepresented Mohawk Energy’s value after Cole sold a warehouse to the company below market price in exchange for a promised 20% stake.

Cole’s lawsuit claims the company has refused to share financial information and that he has not profited from the deal, despite what he describes as false promises and representations from Smith. The second legal challenge comes from HBTPower, a subsidiary of major crypto exchange Huobi, which filed suit in November 2023 alleging breach of contract and misrepresentation. According to HBTPower’s allegations, Smith entered into an agreement in June 2022 for the Chinese company to train Mohawk employees in Bitcoin mining machine repair, but then asked HBTPower personnel to leave Mohawk’s premises while claiming Smith didn’t actually own the warehouse when he signed the contract.

Senator Smith has denied all allegations against him and filed counterclaims against both plaintiffs, positioning the legal battles as defensive actions rather than admissions of fault. In his capacity as Mohawk Energy CEO, Smith told Decrypt that the company remains ‘excited’ to return to its mission of ‘job creation and training’ once the litigation concludes. He specifically addressed the HBTPower case, stating, ‘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.’

The legal troubles for Mohawk Energy emerge against a backdrop of significant expansion in the U.S. cryptocurrency mining sector, which saw Bitcoin mining sites increase by 23% between 2022 and 2024, growing to 48 operations nationwide. This growth has continued into the current year, with Bitcoin’s hashrate reaching new all-time highs recently, according to Shanon Squires, Chief Mining Officer at Compass Mining. She noted that in the U.S., ‘that momentum is especially visible in states like Texas and Wyoming,’ with expansion primarily coming from existing companies rather than new market entrants.

Despite this professionalization trend, Squires acknowledged that variability persists in the industry, with some endeavors ‘popping up and fading’ quicker than others. Her observation that ‘Bitcoin mining is no longer the ‘wild west’ it once was’ but still requires companies to ‘do their homework and work with established partners that have proven themselves through multiple cycles’ provides context for understanding the challenges facing newer entrants like Mohawk Energy during its pivot from coal operations.

The lawsuits against Smith’s company create a complex situation given his simultaneous role as a state senator and author of Kentucky’s pro-crypto legislation. Smith was instrumental in securing passage of several crypto-related bills in Kentucky, including the 2021 measure that provides tax incentives for investments in cryptocurrency mining—the very industry in which his company now faces legal scrutiny. This intersection of policymaking and business operation raises questions about how effectively regulatory frameworks can address the growing pains evident in cases like Mohawk Energy’s difficult transition into Bitcoin mining services.

As the U.S. Bitcoin mining sector continues its expansion, the outcome of these lawsuits against a sitting state senator who helped shape the regulatory environment could have implications beyond Mohawk Energy’s specific circumstances. The cases will test whether the legal system can effectively navigate disputes in this rapidly evolving industry while Smith’s counterclaims against both Cole and HBTPower will determine if his assertions about contract breaches by the plaintiffs have merit. The resolution may influence how other politicians approach involvement in the industries they help regulate through legislation.