By Amy Castor and David Gerard
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Northern Data is a bitcoin mining company that’s publicly listed in Germany. The company got hold of some high-end Nvidia chips with the help of our favorite stablecoin issuer, Tether. Now it’s pivoting to AI in the hopes of reaping $16 billion in an overpriced IPO.
In the midst of this, two whistleblowers have come forth — former Northern Data executives Joshua Porter and Gülsen Kama — who don’t want their reputations sullied by a cheap-ass con. So they are suing for wrongful termination.
Porter and Kama allege that Northern Data is “borderline insolvent,” has been lying to auditors and investors, and owes tens of millions in taxes to the US and Germany.
Meanwhile, Tether has sunk 1.1 billion euros ($1.2 billion) into an AI deal with a cash-strapped company. You have to wonder what they’re getting out of it.
We have some ideas — but we’ll get to those in part 2 of this series. Here in part 1, we’ll start off with the history of Northern Data.
Aroosh Thillainathan, official Northern Data company photo
Who is Northern Data?
Northern Data began as Biosilu Healthcare AG, a pharmaceutical broker for Asian markets. Just as the 2017 bitcoin bubble was finally deflating, the company rebranded to Northern Bitcoin AG, a “green” (!!) bitcoin miner with rigs in Norway. It was listed on the Munich Stock Exchange in May 2018. [Company announcement; press release]
In 2019, Northern Bitcoin purchased US bitcoin miner Whinstone and changed its name to Northern Data. Aroosh Thillainathan became CEO of the merged entity in January 2020, and previous CEO Mathis Schultz moved to CFO. After the merger, Thillainathan began promoting the company as a provider of high-performance computing. [Press release, 2019; 4Investors, 2020, in German; Data Center Dynamics, 2021]
Whinstone and Aroosh Thillainathan
Thillainathan’s background is oddly opaque. His LinkedIn only goes back to 2014, the year that he claims to have founded Whinstone. He started a dating app called “Breeze” in 2015. He also set up failed consulting and real estate agencies. [Press release; North Data]
He also appears to have been a cofounder of Hashtrend AG, which sold hardware and software to bitcoin miners, but the company’s Twitter account was only active from August 2018 to November 2018. [LinkedIn; Twitter]
Thilainathan says in official Northern Data filings that he founded Whinstone in 2014. Whinstone GmbH appears to have been incorporated only in 2016, though Andreas Lange, who worked with Thillainathan at Hashtrend and Northern Data, lists on his LinkedIn: “CTO, Whinstone GmbH, Jun 2015 – Jul 2018.” [LinkedIn; North Data]
Ashton Harris — now head of operations at bitcoin miner Riot Platforms — got into bitcoin as a teenager in 2012. He started Whinstone US in 2018 in New Orleans with a loan of $5,000 from his father, Chad Harris, who was more recently COO of Riot. [Open Corporates]
In September 2018, Whinstone was cash flow negative “We had all these electrical bills to pay,” said Harris. “We had all this equipment cost to pay for the infrastructure and installation at our facility.”
But Harris didn’t want to miss the World Digital Mining Summit in the Georgian capital Tbilisi. So he and colleague Lyle Theriot bought plane tickets on credit and went. One evening at a bar, they bumped into Thillainathan: [YouTube]
And he’s like, “Oh, what do you all do?” And we’re like, we’re just some small-time miners back in New Orleans. We have a megawatt facility that we got up and running by ourselves. At the time, he was selling things like smart PDUs [power distribution units] and internet switches for mining infrastructure.
… We managed to make a business deal over a few drinks. He was based out of Germany, and he flew to New Orleans two or three weeks later, met up with us, and brought some prospective clients. And those clients funded us to build out five megawatts more in New Orleans.
… They throw us some money to build out a prospective 100-megawatt facility, which is kind of where we end up migrating from Louisiana to Texas.
Oddly, Whinstone US was only incorporated in October 2018 — was it named after the German company? [Louisiana Business Filings]
To buy Whinstone US in 2019, Northern Bitcoin issued 3,720,750 new shares — worth 119 million euros ($130 million) at that time.
This was a remarkable sum given that 2019 revenue for Whinstone US was just $328,922! If you were suspicious-minded, you might wonder if this was Northern Bitcoin printing free money to give to Whinstone’s backers for some reason. [SEC]
The phrasing in the merger press release is “The Whinstone Group and its management team have a successful track record in the blockchain industry since 2014 and have established and operated their own mining facilities in the Netherlands, Sweden and the USA.” Short seller Ningi Research looked and couldn’t find evidence of Whinstone US having facilities in Sweden or the Netherlands before the acquisition — this might be Hashtrend (who did operate in the Netherlands) or Whinstone GmbH. [Press release, 2019; Ningi Research, 2022, PDF]
A previous merger press release says: “Thillainathan founded Whinstone in 2014 with the objective of addressing an untapped area of the global data center industry at the time. Within about five years, his company managed to become a global leader in blockchain infrastructure.” This sounds like the data center parts business that Ashton Harris spoke of, which at that time may have been Hashtrend. [press release, 2019]
The September 2018 version of the Hashtrend website mentions: “Before founding Hashtrend AG, he built and managed a successful mining company, Whinstone Mining Ltd.” This is not the entity that was bought by Northern Bitcoin — Whinstone Mining Ltd was incorporated in the UK. [Hashtrend, 2018, in German, archive; Companies House]
We sent an email to Northern Data asking about the various company names and are awaiting their response.
Acquisition frenzy
Through 2020 and 2021, Northern Data grew by acquisitions, selling itself hard as a high-performance computing and AI solutions provider — even though it barely had any HPC or AI business. [Initiation template, PDF]
The company raised money by issuing new shares and convertible bonds, diluting its stock from 14,639,684 shares to 53,497,231 shares — over 3.5 times as many! — between 2020 and 2023. This was the main source of funding for its acquisitions. Whenever Northern Data wanted to buy another company, it just turned on the printer. [Image from Berenberg estimates, taken from FT]
Purchases included:
- April 2020: Kelvin Emtech Group (data center equipment) in Canada for 83,333 shares. [press release]
- January 2021: Hydro66’s Boden data center in Sweden for 4 million euros in cash and 21 million euros in shares. [Data Center Dynamics]
- August 2021: Decentric Europe BV (Netherlands) in a 365 million euro stock-for-stock deal. [Medium]
- October 2021: bitcoin miner Bitfield NV (Amsterdam, Netherlands) in a 400 million euro stock-for-stock deal. [press release]
In a sponsored ad written to look like a content-free interview, Thillainathan said that demand at Northern Data’s Texas data center was exceeding capacity by “thirtyfold” and that its customers were “very large corporates because — from the customer’s point of view — these projects involve total budgets in the triple-digit millions.” This is while Northern Data’s corporate filings admitted that, in reality, its revenue was still almost entirely from crypto mining. [Bitcoinist, 2020]
In July 2020 “Ken L” called Northern Data out in a Medium post, which has since been taken down: “But the truth is that the company does not have any meaningful HPC/AI business and is primarily providing Bitcoin Mining Hosting (BMH) at rather uncompetitive terms.” [Medium, 2020, archive]
Northern Data got into trouble with BaFin, Germany’s financial watchdog. Northern Data had told investors it was expecting 2020 revenues of 120 to 140 million euros and an operating profit of 45 to 60 million euros. Its results ended up not even being close: it took in just 16.4 million euros in revenue with an operating loss — not profit — of 12.3 million euros.
So in October 2021, BaFin filed a criminal complaint against Northern Data for grossly overstating its numbers. This came a year after the Wirecard fiasco where BaFin had been criticized widely for not taking action sooner. [FT, archive; Bloomberg, archive]
In 2021, Northern Data offloaded the Whinstone operations to Texas bitcoin miner Riot for $651 million — $80 million cash and 11.8 million shares of Riot stock. In September 2022, Riot sued, saying Northern Data had failed to disclose Whinstone’s $84 million in liabilities to a third party. Northern Data lost this suit and is appealing.
The ETHpocalypse
Most of Northern Data’s crypto revenue came from mining ETH. But when Ethereum switched to proof of stake in September 2022, Northern Data was stuck with a pile of useless GPU cards. No GPU-minable crypto was financially viable to mine at scale.
We wrote previously about how Northern Data’s 2022 financials — which they didn’t file until March 2024, just before they fired their auditor KPMG — showed dismal losses.
Many miners tried selling their old cards secondhand. (“Totally not used for crypto mining! Ignore charring and burnt smell.”) Some held onto their cards. We hope they’re enjoying them.
After getting rid of the video cards, the former ETH miners used or rented out their data center infrastructure — already set up for power and cooling. Maybe they put in bitcoin ASICs, maybe they put in current Nvidia GPU cards to sell as HPC in the cloud. High-performance computing used to mean weather and atom bombs — now it means AI slop generators.
Northern Data has been trying to make a move to HPC as bitcoin mining makes less and less money. It’s had its issues, like getting enough GPU cards. We’ll get onto that in Part II — when Tether comes calling.
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