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California Northern Bankruptcy Court
Case No. 15-03011
Hashfast Technologies LLC- Adversary Proceeding

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KATTEN MUCHIN ROSENMAN LLP
Craig A. Barbarosh (SBN 160224) 
craig.barbarosh@kattenlaw.com 
650 Town Center Drive, Suite 700 
Costa Mesa, CA 92626-7122 
Telephone: (714) 966-6822 
 
Jessica M. Mickelsen (SBN 277581) 
jessica.mickelsen@kattenlaw.com 
2029 Century Park East, Suite 2600 
Los Angeles, CA 90067-3012 
Telephone: (310) 788-4425  
Facsimile: (310) 788-4471 
 
Peter A. Siddiqui (pro hac vice
peter.siddiqui@kattenlaw.com 
525 W. Monroe Street 
Chicago, IL 60661-3693 
Telephone: (312) 902-5455  
Facsimile: (312) 902-1061 
 
Counsel for Debtors and Debtors-In-Possession 
Hashfast Technologies LLC and HashFast LLC

UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA  

(SAN FRANCISCO DIVISION) 

In re: 

HASHFAST TECHNOLOGIES LLC, a 
California limited liability company, 

Debtor and Debtor-In-Possession 

_____________________________________ 

 Affects HASHFAST LLC, a Delaware 
limited liability company, 

Debtor and Debtor-In-Possession 

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Case No. 14-30725  

(Substantively Consolidated with In re 
HashFast LLC, Case No.  14-30866) 

Chapter 11 

 

HASHFAST TECHNOLOGIES LLC, a 
California limited liability company, and 
HASHFAST LLC, a Delaware limited liability 
company, 

Plaintiffs, 

vs. 

MARC A. LOWE, an individual, aka 
Cypherdoc and/or Cipherdoc,  

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Adversary Case No. ______________

COMPLAINT FOR: 
 
1.   AVOIDANCE OF PREFERENTIAL 

TRANSFERS; 

2.   AVOIDANCE OF FRAUDULENT 

TRANSFERS; 

3.   AVOIDANCE OF FRAUDULENT 

TRANSFERS (CONSTRUCTIVE 
FRAUD); AND 

4.   RECOVERY OF AVOIDED 

Case: 15-03011    Doc# 1    Filed: 02/17/15    Entered: 02/17/15 08:51:34    Page 1 of 12 

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Defendant. )











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TRANSFERS 

 

[11 U.S.C. §§ 544, 547; 548, and 550 and Cal. 
Civil Code §§ 3439.04, 3439.05, and 3439.07]

 
Status Conference: 
Date: TBD 
Time: TBD 

Place: Courtroom 22 
U.S. Bankruptcy Court 
235 Pine Street 
San Francisco, CA 94104 

 

COMPLAINT 

 

HashFast Technologies LLC, a California limited liability company (“HashFast 

Technologies”), and HashFast LLC, a Delaware limited liability company (“HashFast”, 

collectively with HashFast Technologies, the “Debtors” and each a “Debtor”), by and through its 

undersigned counsel, bring this complaint (the “Complaint”) against Defendant Marc A. Lowe, an 

individual, a/k/a Cypherdoc and/or Cipherdoc (the “Defendant”), and in support of this Complaint 

state as follows: 

JURISDICTION 

1. 

This adversary proceeding arises out of and is related to the above-captioned, 

substantively consolidated bankruptcy cases (collectively, the “Bankruptcy Cases”) of In re 

HashFast Technologies, LLC, case no. 14-30725 DM (the “HFT Bankruptcy Case”), and In re 

HashFast, LLC, case no. 14-30866 DM (the “HF Bankruptcy Case”), pending before the United 

States Bankruptcy Court for the Northern District of California, San Francisco Division (the 

“Court”), and/or the claims alleged herein arise under title 11 of the United States Code (the 

“Bankruptcy Code”).  This Court has jurisdiction pursuant to 28 U.S.C. §§ 157 and 1334. 

2. 

The causes of action set forth herein constitute core proceedings pursuant to 28 

U.S.C. § 157(b)(2)(A), (H), and/or (O), and/or relate to the Bankruptcy Cases.  To the extent the 

Court determines that any claim and/or cause of action alleged herein does not constitute a core 

proceeding, the Debtors hereby consent to this Court’s adjudication of the claims and/or causes of 

action and to the entry of final orders and judgments in this adversary proceeding. 

Case: 15-03011    Doc# 1    Filed: 02/17/15    Entered: 02/17/15 08:51:34    Page 2 of 12 

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3. 

Venue is appropriate pursuant to 28 U.S.C. §§ 1391, 1408, and 1409 as this is the 

district in which the Bankruptcy Cases are pending and in which the relevant conduct complained 

of herein took place. 

4. 

On May 9, 2014 (the “Petition Date”), certain petitioning creditors filed a chapter 7 

Involuntary Petition in the Court against Hashfast Technologies under title 11 of the Bankruptcy 

Code [Lead Case Doc. No. 1].   

5. 

On June 3, 2014, HashFast Technologies filed its Conditional Consent to an Order 

for Relief [Doc. No. 36] and its Motion to Convert to Chapter 11 [Lead Case Doc. No. 35].   

6. 

The Bankruptcy Court entered its order converting HashFast Technologies’ case to 

one under chapter 11 of the Bankruptcy Code on June 5, 2014 [Lead Case Doc. No. 40].   

7. 

On June 6, 2014, HashFast filed a voluntary petition for relief under chapter 11 of 

the Bankruptcy Code. 

BACKGROUND 

8. 

The Debtors design, develop, manufacture and sell certain computer chips and 

equipment, including Application Specific Integrated Circuit, or ASIC, semiconductors, for the 

sole purpose of auditing transaction data for the Bitcoin networks, also known as “Bitcoin 

mining.”  On or about June 2013, the Debtors began designing their first generation Golden Nonce 

(the “GN1”), with the assistance of Sandgate Technologies (“Sandgate”) and Uniquify, Inc. 

(“Uniquify”).  Following the development of the GN1, the Debtors worked with DXCorr Design 

(the “DXC”) to design and develop subsequent generations of the GN1. 

9. 

On or about July 2013, HFT began advertising a special purpose computer system 

built around the GN1 (the “BabyJet”) for sale and started accepting orders for the “batch one” 

BabyJets in early August 2013.  The BabyJet and GN1 chip sold well from the time they were 

launched—specifically, between July and December 2013, the Debtors sold approximately 

$18,000,000 in computers, chips, and accessories. 

10. 

On or about July 29, 2013, Defendant Marc A. Lowe (“Defendant”) visited the 

Debtors’ headquarters to ostensibly tour the facility and meet the members and employees of HFT 

prior to purchasing one or more of the Debtors’ products.  During the tour, the Defendant met with 

Case: 15-03011    Doc# 1    Filed: 02/17/15    Entered: 02/17/15 08:51:34    Page 3 of 12 

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Eduardo de Castro, the Chief Executive Officer of HFT and co-owner of HF.  As a result of the 

visit, the Defendant purchased four terra-hash per second of hashing power through the acquisition 

of eight GN1 chips or three to four fully assembled BabyJets (the “Computers”) for the sum of 

$36,000, inclusive of sales tax—a $7,150 discount off of the list price (the “Sale”).  The Defendant 

paid the discounted purchase price for the Computers by personal check dated July 29, 2013. 

11. 

Subsequent to the visit, a memorandum of understanding dated August 5, 2013 (the 

“MOU”) was executed by the Defendant and HFT.  By and through the MOU, the Defendant 

agreed to endorse the Debtors and their products by posting comments and responding to certain 

inquiries on various Bitcoin-related forums and/or message boards, including Bitcointalk.org.  In 

exchange for such “services”, the Defendant was to receive ten percent (10%) of the base sale 

price (i.e., gross sale proceeds) for the first 550 “batch one” BabyJets sold by the Debtors, payable 

in BTC (the “MOU Compensation”).  According to the MOU, the Defendant was entitled to the 

MOU Compensation regardless of whether the “endorsement” contributed in any way to the sale 

of any BabyJet or other HFT product.  A true and correct copy of the MOU is attached hereto as 

Exhibit A and is incorporated herein by reference.  At the time the MOU was executed, HFT was 

offering the BabyJets for sale at a base price of approximately $5,600 or 56 BTC.  

12. 

The Debtors are informed and believe and based thereon allege that the Defendant 

is a medical doctor without any experience marketing or advertising BTC mining hardware or 

hardware manufacturers. 

13. 

In addition to the business relationship established by the MOU, the Defendant also 

purports to have joined HFT’s board of advisors in late-July or early-August 2013.  As the 

Defendant stated in a post dated August 8, 2013: “I have also been asked to join [HFT’s] Board of 

Advisors.”  A true and correct copy of the August 8, 2013 post is attached hereto at pages 1-3 of 

Exhibit B and incorporated herein by reference.  The Debtors allege that the Defendant had direct 

and regular contact with the Debtors’ members, principals, directors, and employees—individuals 

generally unavailable to ordinary customers and creditors. 

14. 

On or about August 8, 2013, the Defendant began posting commentary regarding 

HFT and the Debtors’ products on Bitcointalk.org under a thread titled “HashFast Endorsement.”  

Case: 15-03011    Doc# 1    Filed: 02/17/15    Entered: 02/17/15 08:51:34    Page 4 of 12 

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Between August 8, 2013, and September 9, 2013, the Defendant posted approximately 160 

comments and updates (an average of 5 posts per day) regarding, among other things, the roll-out 

and sale of the BabyJet.  The Defendant’s posts, however, were not limited to salient matters; 

rather, the Defendant also engaged “trolls” in irrelevant and lengthy debate regarding numerous 

topics, including, but not limited to, economics and the philosophy underlying BTC.  The 

irrelevant commentary accounts for a substantial portion of the approximately 160 posts, a sample 

of which is attached hereto at pages 3-227 of Exhibit B and incorporated herein by reference. 

15. 

In or about early September 2013, HFT pre-sold the first 550 BabyJets.  Thereafter, 

on or about September 4, 2013, the Defendant requested payment in accordance with the MOU.  A 

true and correct copy of the request is attached hereto as Exhibit C and incorporated herein by 

reference.  The Defendant calculated that he was owed a total of $308,000 in BTC at the exchange 

rate applicable on August 8, 2013, and requested payment of 3242.1 BTC within seven (7) days. 

16. 

The Debtors were unable to pay immediately the requested amount due to the 

limited availability of funds and BTC.  Indeed, the Debtors did not make the first distribution of 

BTC to the Defendant on account of the MOU until September 5, 2013. 

17. 

In total, the Debtors transferred 3000 BTC to the Defendant (the “MOU Payment”) 

from two different BTC wallets belonging to HFT.  The Debtors transferred the MOU Payment to 

the Defendant via four deposits into a BTC wallet specified by and belonging to the Defendant

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bearing account number xUDJ9 (the “Wallet”)—specifically: (a) 2000 BTC on September 5, 

2013; (b) 250 BTC on September 14, 2013; (c) 250 BTC on September 22, 2013; and (d) 500 

BTC on September 23, 2013 (collectively, the “Transfers”).  A true and correct copy of the 

transaction record is attached hereto as Exhibit D and incorporated herein by reference.  With the 

exception of one BTC, the Transfers are currently in the Wallet and, to the best of the Debtors’ 

knowledge, have never been moved out of the Wallet.   

18. 

At the times of the Transfers, the BTC transferred to the Defendant were worth 

                                                 

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 A true and correct copy of correspondence from the Defendant identifying the Wallet is attached 

hereto as Exhibit E and incorporated herein by reference. 

Case: 15-03011    Doc# 1    Filed: 02/17/15    Entered: 02/17/15 08:51:34    Page 5 of 12 

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$363,861.43. 

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   Based on the value of the BTC at the time of the transfers, the Defendant received 

approximately $11,370 per day or $2,274 per post on the “HashFast Endorsement” thread on 

Bitcointalk.org.  By contrast, the highest salary paid to any principal or employee of HFT and/or 

HF was $144,000 for the entire calendar year of 2013. 

19. 

At or about the time the Defendant was “endorsing” the Debtors and their products, 

the Debtors attempted to recruit other persons to provide the same or similar services.  A true and 

correct copy of such correspondence is attached hereto as Exhibit F and incorporated herein by 

reference.  However, in stark contrast to the MOU Payment, the other parties were offered $150 or 

a little more than 1 BTC per week (approximately 0.0014% of the compensation paid to the 

Defendant) to post two to four comments per day on certain online discussion boards or forums—

roughly $21.43 per day or $10.71 per post (based on two comments per day). 

20. 

At the time of the Transfers, the Debtors owed substantial sums of money and/or 

equipment to numerous customers and/or vendors.  Many of these obligations remain unpaid and 

constitute general unsecured claims against the Estate.  As of September 30, 2013, the Debtors’ 

balance sheet had a negative equity balance of about $5 million. 

21. 

Additionally, at or about the time of the Transfers, the Debtors were incurring 

significant liabilities in the course of their operations that ultimately exceeded the Debtors’ ability 

to repay.  More precisely, despite an inability to deliver the BabyJet or GN1, the Debtors 

continued to accept orders for these products and promised guaranteed delivery dates that the 

Debtors failed to meet.  In an effort to meet these timelines, the Debtors ordered products on 

expedited delivery schedules, which substantially increased the production costs of the GN1 and 

BabyJet.  Due to the increased costs and other associated overhead, the Debtors were unable to 

realize a profit from their operations or meet their financial and/or delivery obligations. 

                                                 

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 On September 5, 2013, one BTC was worth $120.5333 (US).  On September 14, 2013, one BTC 

was worth $124.0813 (US).  On September 22, 2013, one BTC was worth $122.651 (US).  On 
September 23, 2013, one BTC was worth $122.2235 (US).  See  Historical Bitcoin Price Index, 
available at http://www.coindesk.com/price/ (last visited Dec. 22, 2014).  As of January 14, 2015, 
the Transfers are worth approximately $555,000, which is based on a value of $185.00 (US) per 
BTC.  See Historical Bitcoin Price Index, available at http://www.coindesk.com/price/ (last visited 
Jan. 14, 2015).  As of the commencement of the HF Bankruptcy on May 9, 2014, the Transfers 
were worth approximately $1,344,705.  Id.  At the 1-year height in the BTC market in early-
December 2013, the Transfers had a value in excess of $3,400,000.  Id.   

Case: 15-03011    Doc# 1    Filed: 02/17/15    Entered: 02/17/15 08:51:34    Page 6 of 12 

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22. 

Ultimately, the Debtors were unable to fulfill many of the orders on or before the 

guaranteed delivery date (December 31, 2013), including, but not limited to, many of the “batch 

one” orders upon which the MOU Payment was premised.  As a result, many customers began 

demanding refunds for their purchases in or about January 2014.  As the Debtors lacked sufficient 

funds and/or BTC to pay all the refunds requested and remained unable to fill customer orders, 

multiple customers commenced lawsuits against the Debtors in an effort to obtain a refund in 

currency and/or BTC.  

23. 

Like many other customers, the Defendant requested a refund of the $36,000 he 

paid in association with the Sale in or about January 2014.  The Defendant received a full refund 

of the $36,000 purchase price plus a five percent (5%) bonus, for a total of $37,800, on January 

10, 2014 (the “Refund”).  The Refund was paid from HFT’s account at Silicon Valley Bank via a 

wire transfer to the Defendant.   

24. 

The Debtors are informed and believe and based thereon alleges that the Defendant 

currently holds the specific BTC paid by HFT in the Wallet. 

FIRST CLAIM FOR RELIEF 

AVOIDANCE OF PREFERENTIAL TRANSFERS 

[11 U.S.C. § 547(b)] 

25. 

The Debtors repeat and reallege the allegations contained in Paragraphs 1 through 

24 as if fully set forth herein. 

26. 

At the time of the Refund, the Defendant was a creditor of one or both of the 

Debtors by virtue of the Sale. 

27. 

The currency used to pay the Refund constituted property belonging to one or both 

of the Debtors at the time of its payment. 

28. 

The Refund was paid on account of an antecedent debt owing to the Defendant as a 

result of Debtors’ inability to fulfill the Sale.  More precisely, upon the Debtors’ failure to deliver 

the Computers on or before December 31, 2013, the Defendant became a creditor of the Debtors. 

29. 

By virtue of his involvement with one or both of the Debtors, including their 

members, principals, directors and employees, the Defendant constituted an insider within the 

Case: 15-03011    Doc# 1    Filed: 02/17/15    Entered: 02/17/15 08:51:34    Page 7 of 12 

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meaning of 11 U.S.C. §§ 101(31) at the time of the Refund as the Defendant possessed authority 

and/or influence over the Debtors and their principals, and was previously engaged in a joint 

venture with the Debtors pursuant to the MOU for the sale of 550 BabyJets. 

30. 

The Refund was paid on or about January 10, 2014, within one year of the HFT 

Petition Date and HF Petition Date (the “Preference Period”). 

31. 

As a result of the Refund, the Defendant received payment in full on account of an 

antecedent debt that would have constituted a general unsecured claim against the Estate if not 

paid prepetition. 

32. 

If the Refund had not been paid within the Preference Period, the Defendant would 

not have received the full Refund in the context of a chapter 7 liquidation as the Debtors were and 

still are insolvent and unable to pay all general unsecured creditors in full, including, but not 

limited to, the claims relating to refund requests of creditors otherwise similarly-situated to the 

Defendant.  

33. 

By reason of the foregoing, the Refund is avoidable pursuant to 11 U.S.C. § 547. 

SECOND CLAIM FOR RELIEF 

AVOIDANCE OF FRAUDULENT TRANSFERS 

[11 U.S.C. § 544 and Cal. Civil Code § 3439.04(a)(2)] 

34. 

The Debtors repeat and reallege the allegations contained in Paragraphs 1 through 

33 as if fully set forth herein. 

35. 

The Transfers occurred within the four-year period immediately preceding the HFT 

Petition Date and HF Petition Date.   

36. 

The Defendant received the Transfers, and he continues to hold the BTC 

transferred in the Wallet. 

37. 

The BTC that comprised the Transfers constituted property belonging to one or 

both of the Debtors at the time of the Transfers. 

38. 

The Debtors received less than reasonably equivalent value in exchange for the 

Transfers.  More precisely, the value of the “services” provided by the Defendants and received by 

the Debtors (i.e., posting 160 comments on Bitcoin-related forums over a period of approximately 

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one month) was less valuable than the consideration provided in exchange for such “services”—

namely, BTC worth more than $350,000 at the time of the Transfers. 

39. 

Several customers and/or vendors held claims against the Debtors at the time of the 

Transfers, including, but not limited to, Pete Morici. 

40. 

At the time of the Transfers, the Debtors were engaged in the designing, 

manufacture and sale of the GN1 and BabyJet.  The Debtors, however, lacked sufficient capital to 

maintain operations and, as a result, resorted to utilizing customer, pre-purchase funds and selling 

BTC in an effort to maintain operations.  Following the payment of the MOU Payment, the 

Debtors possessed (and still possess) unreasonably small assets in relation to the business and the 

scale of the transactions required to maintain productivity—a deficiency that ultimately led to the 

failure of the business and bankruptcy. 

41. 

Additionally, at the time of the Transfers, the Debtors were incurring substantial 

liabilities in the operation of their business that exceeded their ability to repay.  More precisely, 

the Debtors were unable to fulfill existing orders for the BabyJets and/or GN1 chip, or remain 

current with the vendors that manufactured the component parts and/or assembled the Debtors’ 

products at the time of the Transfers.  As a result, the Debtors were incurring substantial liabilities, 

and they lacked the financial capability to repay. 

42. 

At present, the claims against the Estate total approximately $40,754,674.  The 

total assets presently held are insufficient to pay all the claims against the Estate.  Recovery of the 

Transfers is necessary to satisfy the claims of creditors asserted against the Estate.  

43. 

By reason of the foregoing, the Transfers are avoidable pursuant to 11 U.S.C. § 544 

and Cal. Civil Code § 3439.04. 

THIRD CLAIM FOR RELIEF 

AVOIDANCE OF FRAUDULENT TRANSFERS (CONSTRUCTIVE FRAUD) 

[11 U.S.C. § 544 and Cal. Civil Code § 3439.05] 

44. 

The Debtors repeat and reallege the allegations contained in Paragraphs 1 through 

43 as if fully set forth herein. 

45. 

The Transfers occurred within the four-year period immediately preceding the HFT 

Case: 15-03011    Doc# 1    Filed: 02/17/15    Entered: 02/17/15 08:51:34    Page 9 of 12