{"id":26817,"date":"2024-07-14T20:06:51","date_gmt":"2024-07-14T20:06:51","guid":{"rendered":"https:\/\/davidgerard.co.uk\/blockchain\/?p=26817"},"modified":"2025-09-28T07:59:57","modified_gmt":"2025-09-28T07:59:57","slug":"tether-and-northern-data-part-1-the-miners-tale","status":"publish","type":"post","link":"https:\/\/davidgerard.co.uk\/blockchain\/2024\/07\/14\/tether-and-northern-data-part-1-the-miners-tale\/","title":{"rendered":"Tether and Northern Data. Part I: the miner\u2019s tale"},"content":{"rendered":"<p><em>By Amy Castor and David Gerard<\/em><\/p>\n<ul>\n<li aria-level=\"1\">If you like this post, please <b><i>tell at least one other person<\/i><\/b>. It really helps!<\/li>\n<li aria-level=\"1\">To encourage more posts, here\u2019s<a href=\"https:\/\/www.patreon.com\/amycastor\"> Amy\u2019s<\/a> Patreon and here\u2019s <a href=\"https:\/\/www.patreon.com\/davidgerard\/\">David\u2019s<\/a>. For casual tips, here\u2019s<a href=\"http:\/\/ko-fi.com\/amycastor\"> Amy\u2019s<\/a> Ko-Fi and here\u2019s<a href=\"https:\/\/ko-fi.com\/A1529D5\"> David\u2019s<\/a>.<\/li>\n<\/ul>\n<p>Northern Data is a bitcoin mining company that\u2019s 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\u2019s pivoting to AI in the hopes of reaping $16 billion in an overpriced IPO.<\/p>\n<p>In the midst of this, two whistleblowers have come forth \u2014\u00a0former Northern Data executives Joshua Porter and G\u00fclsen Kama \u2014 who don\u2019t want their reputations sullied by a cheap-ass con. So they are suing for wrongful termination.<\/p>\n<p>Porter and Kama allege that Northern Data is \u201cborderline insolvent,\u201d has been lying to auditors and investors, and owes tens of millions in taxes to the US and Germany.<\/p>\n<p>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\u2019re getting out of it.<\/p>\n<p>We have some ideas \u2014 but we\u2019ll get to those in part 2 of this series. Here in part 1, we\u2019ll start off with the history of Northern Data.<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2024\/07\/14\/tether-and-northern-data-part-1-the-miners-tale\/anoosh\/\" rel=\"attachment wp-att-26818\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-26818\" src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2024\/07\/anoosh.jpg\" alt=\"\" width=\"510\" height=\"315\" srcset=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2024\/07\/anoosh.jpg 680w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2024\/07\/anoosh-300x185.jpg 300w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2024\/07\/anoosh-348x215.jpg 348w\" sizes=\"auto, (max-width: 510px) 100vw, 510px\" \/><\/a><\/p>\n<p style=\"text-align: center;\"><i><small>Aroosh Thillainathan, official Northern Data company photo<\/small><\/i><\/p>\n<p>&nbsp;<\/p>\n<h3>Who is Northern Data?<\/h3>\n<p>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 \u201cgreen\u201d (!!) bitcoin miner with rigs in Norway. It was listed on the Munich Stock Exchange in May 2018. [<a href=\"http:\/\/biosilu-healthcare.de\/news\/69\/72\/Ad-hoc-Biosilu-Healthcare-AG-adjusts-company-s-business-model.html\"><i>Company announcement<\/i><\/a><i>; <\/i><a href=\"https:\/\/northerndata.de\/en\/investor-relations\/news\/northern-bitcoin-ag-commencement-of-trading-on-frankfurt-stock-exchange-including-listing-on-xetra\"><i>press release<\/i><\/a>]<\/p>\n<p>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. [<a href=\"https:\/\/www.eqs-news.com\/news\/corporate\/northern-bitcoin-expands-executive-board\/1231593\"><i>Press release<\/i><\/a><i>, 2019; <\/i><a href=\"https:\/\/www.4investors.de\/nachrichten\/boerse.php?sektion=stock&amp;ID=138846\"><i>4Investors<\/i><\/a><i>, 2020, in German; <\/i><a href=\"https:\/\/www.datacenterdynamics.com\/en\/news\/northern-data-buys-hydro66-bitcoin-mining-data-center\/\"><i>Data Center Dynamics<\/i><\/a><i>, 2021<\/i>]<\/p>\n<h3>Whinstone and Aroosh Thillainathan<\/h3>\n<p>Thillainathan\u2019s 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 \u201cBreeze\u201d in 2015. He also set up failed consulting and real estate agencies. [<a href=\"https:\/\/t.co\/oHThZCqsH6\"><i>Press release<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.northdata.com\/Thillainathan,+Aroosh+Mayoorathan,+Kreuzlingen\/11se\"><i>North Data<\/i><\/a>]<\/p>\n<p>He also appears to have been a cofounder of Hashtrend AG, which sold hardware and software to bitcoin miners, but the company\u2019s Twitter account was only active from August 2018 to November 2018. [<a href=\"https:\/\/www.linkedin.com\/posts\/jan-werel_andreas-lange-aroosh-thillainathan-vielen-activity-6448167735032578049-8yjY\/\"><i>LinkedIn<\/i><\/a><i>; <\/i><a href=\"https:\/\/x.com\/HashtrendAG\"><i>Twitter<\/i><\/a>]<\/p>\n<p>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\u00a0 with Thillainathan at Hashtrend and Northern Data, lists on his LinkedIn: \u201cCTO, Whinstone GmbH, Jun 2015 &#8211; Jul 2018.\u201d [<a href=\"https:\/\/www.linkedin.com\/in\/andreas-lange-2b4a0b135\/details\/experience\/\"><i>LinkedIn<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.northdata.de\/WHINSTONE+GmbH,+Frankfurt+a.+Main\/Amtsgericht+Frankfurt+am+Main+HRB+105482\"><i>North Data<\/i><\/a>]<\/p>\n<p>Ashton Harris \u2014 now head of operations at bitcoin miner Riot Platforms \u2014 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 <a href=\"https:\/\/amycastor.com\/2023\/10\/23\/texans-versus-bitcoin-jackie-sawicky-and-the-texas-coalition-against-cryptomining\/\">COO of Riot<\/a>. [<a href=\"https:\/\/opencorporates.com\/companies\/us_la\/43231155K\"><i>Open Corporates<\/i><\/a>]<\/p>\n<p>In September 2018, Whinstone was cash flow negative. \u201cWe had all these electrical bills to pay,\u201d said Harris. \u201cWe had all this equipment cost to pay for the infrastructure and installation at our facility.\u201d<\/p>\n<p>But Harris didn\u2019t 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: [<a href=\"https:\/\/www.youtube.com\/watch?v=JDQyOPwH_pI\"><i>YouTube<\/i><\/a>]<\/p>\n<blockquote><p>And he\u2019s like, \u201cOh, what do you all do?\u201d And we\u2019re like, we\u2019re 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 [<i>power distribution units<\/i>] and internet switches for mining infrastructure.<\/p>\n<p>&#8230; 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.<\/p>\n<p>&#8230; 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.<\/p><\/blockquote>\n<p>Oddly, Whinstone US was only incorporated in October 2018 \u2014 was it named after the German company? [<a href=\"https:\/\/coraweb.sos.la.gov\/commercialsearch\/CommercialSearchDetails.aspx?CharterID=1336147_DEDBFD7AE5\"><i>Louisiana Business Filings<\/i><\/a>]<\/p>\n<p>To buy Whinstone US in 2019, Northern Bitcoin issued 3,720,750 new shares \u2014 worth 119 million euros ($130 million) at that time.<\/p>\n<p>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\u2019s backers for some reason. [<a href=\"https:\/\/www.sec.gov\/Archives\/edgar\/data\/1167419\/000107997321000745\/ex99x1.htm\"><i>SEC<\/i><\/a>]<\/p>\n<p>The phrasing in the merger press release is \u201cThe 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.\u201d Short seller Ningi Research looked and couldn\u2019t find evidence of Whinstone US having facilities in Sweden or the Netherlands before the acquisition \u2014 this might be Hashtrend (who did operate in the Netherlands) or Whinstone GmbH. [<a href=\"https:\/\/www.businesswire.com\/news\/home\/20191118005705\/en\/Northern-Bitcoin-Merges-With-Leading-US-Competitor\"><i>Press release<\/i><\/a><i>, 2019; <\/i><a href=\"https:\/\/ningiresearch.com\/wp-content\/uploads\/2022\/07\/NINGI_Research_Northern_Data_AG_NB2.pdf\"><i>Ningi Research<\/i><\/a><i>, 2022, PDF<\/i>]<\/p>\n<p>A previous merger press release says: \u201cThillainathan 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.\u201d This sounds like the data center parts business that Ashton Harris spoke of, which at that time may have been Hashtrend. [<a href=\"https:\/\/www.eqs-news.com\/news\/corporate\/northern-bitcoin-expands-executive-board\/1231593\"><i>press release<\/i><\/a><i>, 2019<\/i>]<\/p>\n<p>The September 2018 version of the Hashtrend website mentions: \u201cBefore founding Hashtrend AG, he built and managed a successful mining company, Whinstone Mining Ltd.\u201d This is not the entity that was bought by Northern Bitcoin \u2014 Whinstone Mining Ltd was incorporated in the UK. [<i>Hashtrend, 2018, in German, <\/i><a href=\"https:\/\/web.archive.org\/web\/20180913222814\/https:\/\/www.hashtrend.ch\/\"><i>archive<\/i><\/a><i>; <\/i><a href=\"https:\/\/find-and-update.company-information.service.gov.uk\/officers\/Hn8EFwY9t9zMjjbJPfud0GRdfFE\/appointments\"><i>Companies House<\/i><\/a>]<\/p>\n<p>We sent an email to Northern Data asking about the various company names and are awaiting their response.<\/p>\n<h3>Acquisition frenzy<\/h3>\n<p>Through 2020 and 2021, Northern Data grew by acquisitions, selling itself hard as a high-performance computing and AI solutions provider \u2014 even though it barely had any HPC or AI business. [<a href=\"https:\/\/lp.northerndata.de\/hubfs\/Investor%20Relations\/Other\/DE000A0SMU87_NorthernData_Initiaton_191223_new2.pdf?hsLang=en\"><i>Initiation template<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>The company raised money by issuing new shares and convertible bonds, diluting its stock from 14,639,684 shares to 53,497,231 shares \u2014 over 3.5 times as many! \u2014 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. [<a href=\"https:\/\/d1e00ek4ebabms.cloudfront.net\/production\/f19b0d7f-7e81-4c04-9538-a7068da1b04f.png\"><i>Image<\/i><\/a><i> from Berenberg estimates, taken from <\/i><a href=\"https:\/\/www.ft.com\/content\/18cf9179-b7e1-49cd-badf-da7848147244\"><i>FT<\/i><\/a>]<\/p>\n<p>Purchases included:<\/p>\n<ul>\n<li aria-level=\"1\">April 2020: Kelvin Emtech Group (data center equipment) in Canada for 83,333 shares. [<a href=\"https:\/\/www.reuters.com\/article\/business\/healthcare-pharmaceuticals\/northern-data-announces-acquisition-of-canadian-data-center-specialist-kelvin-em-idUSASN0005RZ\/\"><i>press release<\/i><\/a>]<\/li>\n<li aria-level=\"1\">January 2021: Hydro66\u2019s Boden data center in Sweden for 4 million euros in cash and 21 million euros in shares. [<a href=\"https:\/\/www.datacenterdynamics.com\/en\/news\/northern-data-buys-hydro66-bitcoin-mining-data-center\/\"><i>Data Center Dynamics<\/i><\/a>]<\/li>\n<li aria-level=\"1\">August 2021: Decentric Europe BV (Netherlands) in a 365 million euro stock-for-stock deal. [<a href=\"https:\/\/medium.com\/frankfurtvalley\/northern-data-acquires-decentric-europe-for-365m-7307c5d4abf7\"><i>Medium<\/i><\/a>]<\/li>\n<li aria-level=\"1\">October 2021: bitcoin miner Bitfield NV (Amsterdam, Netherlands) in a 400 million euro stock-for-stock deal. [<a href=\"https:\/\/northerndata.de\/en\/investor-relations\/news\/northern-data-acquires-bitcoin-miner-bitfield-nv-under-an-up-to-eur-400-million-stock-for-stock-deal-and-issues-new-revenue-guidan\"><i>press release<\/i><\/a>]<\/li>\n<\/ul>\n<p>In a sponsored ad written to look like a content-free interview, Thillainathan said that demand at Northern Data\u2019s Texas data center was exceeding capacity by \u201cthirtyfold\u201d and that its customers were \u201cvery large corporates because \u2014 from the customer\u2019s point of view \u2014 these projects involve total budgets in the triple-digit millions.\u201d This is while Northern Data\u2019s corporate filings admitted that, in reality, its revenue was still almost entirely from crypto mining. [<a href=\"https:\/\/bitcoinist.com\/interview-with-northern-data-ceo-demand-is-exceeding-our-capacities-thirtyfold\/\"><i>Bitcoinist<\/i><\/a><i>, 2020<\/i>]<\/p>\n<p>In July 2020 \u201cKen L\u201d called Northern Data out in a Medium post, which has since been taken down: \u201cBut 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.\u201d [<i>Medium, 2020, <\/i><a href=\"https:\/\/archive.is\/Btyyt\"><i>archive<\/i><\/a>]<\/p>\n<p>Northern Data got into trouble with BaFin, Germany\u2019s 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<i> loss<\/i> \u2014\u00a0not profit \u2014 of 12.3 million euros.<\/p>\n<p>So in October 2021, BaFin filed a criminal complaint against Northern Data for grossly overstating its numbers. This came a year after the <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2020\/06\/27\/what-the-collapse-of-wirecard-means-for-crypto\/\">Wirecard fiasco<\/a> where BaFin had been criticized widely for not taking action sooner. [<a href=\"https:\/\/www.ft.com\/content\/498a9ff3-5207-42ed-a451-61f5a25af68e\"><i>FT<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.is\/1D7z9\"><i>archive<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.bloomberg.com\/opinion\/articles\/2021-10-04\/northern-data-takes-a-bad-trip-as-german-regulator-files-complaint?embedded-checkout=true\"><i>Bloomberg<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.is\/vKHtm\"><i>archive<\/i><\/a>]<\/p>\n<p>In 2021, Northern Data offloaded the Whinstone operations to Texas bitcoin miner Riot for $651 million \u2014 $80 million cash and 11.8 million shares of Riot stock. In September 2022, Riot sued, saying Northern Data had failed to disclose Whinstone\u2019s $84 million in liabilities to a third party. Northern Data lost this suit and is appealing.<\/p>\n<h3>The ETHpocalypse<\/h3>\n<p>Most of Northern Data\u2019s crypto revenue came from mining ETH. But when Ethereum switched to <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2022\/08\/20\/proof-of-stake-is-better-than-proof-of-work-but-ethereums-merge-wont-fix-any-other-problem-with-cryptocurrency\/\">proof of stake<\/a> 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.<\/p>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2024\/04\/07\/crypto-is-going-great-kucoin-busted-how-kickstarter-shot-itself-in-the-foot-with-blockchain-tether-goes-ai\/\">We wrote previously<\/a> about how Northern Data\u2019s 2022 financials \u2014 which they didn\u2019t file until March 2024, just before they fired their auditor KPMG \u2014\u00a0showed dismal losses.<\/p>\n<p>Many miners tried selling their old cards secondhand. (&#8220;Totally not used for crypto mining! Ignore charring and burnt smell.&#8221;) Some held onto their cards. We hope they\u2019re enjoying them.<\/p>\n<p>After getting rid of the video cards, the former ETH miners used or rented out their data center infrastructure \u2014 already set up for power and cooling. Maybe they put in bitcoin ASICs, maybe they put in <i>current<\/i> Nvidia GPU cards to sell as HPC in the cloud. High-performance computing used to mean weather and atom bombs \u2014 now it means AI slop generators.<\/p>\n<p>Northern Data has been trying to make a move to HPC as bitcoin mining makes less and less money. It\u2019s had its issues, like getting enough GPU cards. We\u2019ll get onto that in <a href=\"https:\/\/amycastor.com\/2024\/07\/22\/tether-and-northern-data-part-ii-the-partnership\/\">Part II \u2014 when Tether comes calling<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<br><br><div align=\"center\"><p><a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\"><img src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/10\/become_a_patron_button.svg\" alt=\"Become a Patron!\" title=\"Become a Patron!\" width=217 height=51><\/a><br><p style=\"align:center;\" class=\"patreon-badge\"><i>Your subscriptions keep this site going. <a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\">Sign up today!<\/a><\/i><\/p><\/div>","protected":false},"excerpt":{"rendered":"<p>Whenever Northern Data wanted to buy another company, it just turned on the printer.<\/p>\n","protected":false},"author":1,"featured_media":26818,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[3515,3836,3825,3831,3826,3841,3835,3832,3840,82,1238,3830,3834,3839,3829,3838,3837,3828,1717,3827,3759,898,39,3833],"class_list":["post-26817","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorised","tag-ai","tag-andreas-lange","tag-aroosh-thillainathan","tag-ashton-harris","tag-biosilu-healthcare","tag-bitfield","tag-breeze","tag-chad-harris","tag-decentric","tag-ethereum","tag-germany","tag-gulsen-kama","tag-hashtrend","tag-hydro66","tag-joshua-porter","tag-kelvin-emtech","tag-lyle-theriot","tag-mathis-schultz","tag-mining","tag-northern-bitcoin","tag-northern-data","tag-riot-blockchain","tag-tether","tag-whinstone"],"jetpack_featured_media_url":"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2024\/07\/anoosh.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/26817","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/comments?post=26817"}],"version-history":[{"count":13,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/26817\/revisions"}],"predecessor-version":[{"id":27200,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/26817\/revisions\/27200"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media\/26818"}],"wp:attachment":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media?parent=26817"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/categories?post=26817"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/tags?post=26817"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}