I doubt customer liabilities are over $10 million, but I don't know how bad it is in total. I'm sure it's bad though. There seemed to be some huge commitments made to appease big customers. As for suppliers... Well... In a bankruptcy context it may not matter, as those suppliers may be ordered to hand over the goods that are already finished and their debts end up treated like any other creditors. That won't make those suppliers very happy though.

The only thing I will flat out deny above is that Amy A was lying.
She came on very late in the game with the best of intentions, and she has taken a lot of flack for a situation she had ZERO part in creating.

She was shown financials that put X value on assets and hadn't accounted for all the liabilities, because those were the numbers that existed at the time. The value of a chip over the last few months has a lot of room for debate. The value of a gigahash has plummeted rapidly. Very few rank and file people at the company had a grasp on the economics of mining. Hell, most people who are miners don't have a grasp on it. For the most part I would say top management and some of the core tech team does have a pretty good grasp on it. But they had a certain overestimation of how strong their lead was and what the company could really pull off with the cash from preorders.

Towards the end top management seemed to be grasping at straws and avoiding elephants in the room. There was always the promise of some huge chip deal that would bring in a bunch of cash. Apparently, from the filings, there still seems to be this possibility.

 I have a feeling they are only now finally tallying up how bad the liability situation is. The chapter 11 filing will have to reveal this.  

The idea of HF money going to tapeout Bliss is just completely ridiculous.

There is no connection other than the fact that certain individuals on the sales side who had a bit of a falling out with HF management ended up at Bliss. Obviously they had been talking to the Bliss founders and each other before they quit or were fired. There is no connection between the technical people at Bliss and the technical people at HF whatsoever.

There is no money connection, unless there are some mutual secret investors behind the scenes. I doubt it. HF generally didn't seem to consider Scrypt to be strategic at all. There was no work on a Scrypt ASIC whatsoever as far as I know. No one even mentioned Scrypt or Altcoins. The attitude is/was that those are also-rans and a distraction from Bitcoin.

Apparently the court posted audio of the entire hearing. This is public record:

https://dl.dropboxusercontent.com/u/7804267/hashfast%20hearing%20federal%20bankruptcy%205.23.2014.mp3

As I understand it, Decastro is out as CEO. You can hear something to this effect in the comments between the judge and Hashfast's lawyer.



And the order on what happened today:

Hearing held and continued. The arbitration order issued on 5/8/14 will remain in effect until further order of the court. The Court orally orders that the debtor is not to engage in transactions outside the normal course of business. A continued hearing will be held on 5/28/14 at 9:30 a.m. (related document(s): [8] Motion to Appoint Trustee filed by Liquidbits Corp.) Hearing scheduled for 05/28/2014 at 09:30 AM at San Francisco Courtroom 22 - Montali.



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I am not really qualified to do much more than speculate. First off, I'm sure 20 million did not actually come in.  Many of the largest deals had staged payments upon delivery. And where is that number coming from anyways? Someone's linkedin profile?

It's not that hard to blow through millions when you are trying to cram a new 28nm chip through rapid production and buy enough silicon to dominate the market. Substantial cash was spent upfront on securing bulk quantities of components for chassis and board production. I'm sure the court filings will very soon be showing exactly the inventory on hand. I know for a fact it is still there and is fairly substantial. Hashfast had to lock in large quantities for long lead-time parts in order to secure the supply chain. That's a high stakes game with the timeframes in question. As a new company it's all cash upfront.

As I understand it, Ciara was also prepaid a bunch of money to gear up for mass production and cover express shipping around the world, and then ended up sitting idle much of the time because the boards were not ready. There were other issues with changing horses in midstream and the usual technical snafus.

Most of the problems come down to biting off more than they could chew, going too fast, and the fact that the first revisions of boards just didn't work right and all the timing and supply chain logistics depended on that. And ultimately the price of hardware has plummeted and the difficulty has skyrocketed in a matter of months.

When they missed the first delivery date they did indeed pay refunds. I'm not sure how much, but they went out. There were also legal settlements and a lot of money spent on lawyers as soon as this happened.

The situation right now sucks. The EVO technology, chips and firmware now work quite well and if cranked out in a no-frills package could be very competitive. But without some drastic action from the courts and creditors and some kind of cash infusion, it does not look good.   BFL is probably in just as bad shape. I feel like the USA's ASIC technology just launched and already needs a bailout. The Ants are eating everyone's lunch. I guess that's bitcoin time.

Huh. Well this is interesting.

Apparently the court posted audio of the entire hearing. This is public record:

https://dl.dropboxusercontent.com/u/7804267/hashfast%20hearing%20federal%20bankruptcy%205.23.2014.mp3

Looks like your next hour and a half is occupied:



And the order on what happened today:

Hearing held and continued. The arbitration order issued on 5/8/14 will remain in effect until further order of the court. The Court orally orders that the debtor is not to engage in transactions outside the normal course of business. A continued hearing will be held on 5/28/14 at 9:30 a.m. (related document(s): [8] Motion to Appoint Trustee filed by Liquidbits Corp.) Hearing scheduled for 05/28/2014 at 09:30 AM at San Francisco Courtroom 22 - Montali.



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I am not hf-engineer.

But yeah, he's a good guy and representative of the people who have been working their asses off to try and make things right. I'm not sure what his current involvement is, but he certainly has been committed. This company represented a lot to a bunch of good people. We're not happy it came to this either. And we certainly aren't sitting on our piles of paper wallets or overseeing our vast mining farms laughing maniacally. There are a lot of people who took a financial and emotional beating on this side as well.

The boards were built by a contact manufacturer for VMC. They were not used for any sort of mining by hashfast other than a test of a few minutes per board. The reference design that VMC was building off required multiple sequential reworks, each tracked with a sticker. That doesn't make it a very good reference design, but it was the best working design at the time. Engineering and production were happening way too fast with too much overlap so that's the way it had to happen for the timeframe involved.


I really don't know, I didn't have access to the finances. I do know it was pretty obvious that things were a mess and the accountant was overwhelmed. There should have been a CFO and strict procedures on dealing with BTC from the start. They did take action to get finances in order and bring in proper controls, but by the time things got rolling the cashflow issues were so bad it sort of didn't matter. It is also possible they might have just overshot the market and were way too optimistic on how much money was allocated to chip production as opposed to board and box production.


Sigh. So professional around here...
Certain individuals bore the brunt of initial flack as they were the most public face of sales for the company. Whatever industry they worked in previously is not particularly relevant. Said individuals have actually not been involved with the company for some time. You might be surprised how sympathetic some of those individuals were to the customer concerns being raised in this forum and it may have been part of the reason they left the company. That's all I can say about that.
 

Dunno. That stuff was before my time. I will say that even though that lawsuit started the process, I think it has far less merit than the cases with Liquidbits and other creditors. If that case was the only legal trouble and they could afford to fight it, they would have won. A post in a forum or verbal statements from a customer service rep does not equal a contract.  

Common sense would dictate that a prepayment for a purchase in a highly volatile "property" would be converted back to the fiat exchange rate especially if the purpose of that payment is to fund building the product. I'm quite sure that if BTC had crashed to $1, everyone would be demanding their fiat price back. That said, yes, it is certainly facepalm worthy that they didn't foresee this scenario. They should have made it explicitly clear what exactly the refund terms would be. But this horse is dead. Those claims would only pay off if there were deep pockets to go after and lawyers could be paid enough to keep the case going long enough to force a settlement. Now there is a bankruptcy and $USD and paper contracts are all that are going to matter.

I'm just a dog. 

Up until recently I have been afraid to have my name associated with this company at all because of the ensuing harassment. The bulk of people listed on hashfast.org haven't even been involved with the company for ages.

A lot of people have worked their asses off in good faith trying to fix the situation because there was always hope things would turn around. Management never intended to defraud anyone, but just didn't know when to admit they were in too deep.

Lots of people have personally paid the price for having faith, myself included. Let's just say I am a creditor.

At this point I feel I can address some of what I have read on this forum that is just crazy talk:

There is no 16nm chip. Wow. Now that would be something. New chip designs were in development that  would apparently get more performance out of 28nm.

There is no secret mining bunker. The liquidbits kickback deal was a bit of a surprise to me, but the actual amount of GHS shipped to liquidbits was fairly negligible and I'm sure they never paid anything back to HF considering what they were owed. There was absolutely no HF mining operation beyond burn-in and engineering. There was never a surplus of hardware, and when there was, there was nowhere to plug it in.

There were no "used" boards sold to anyone, including VMC. Every single board was tested, and that test process involved applying thermal paste. Without it the chips overheat in seconds. In the interest of shipping rapidly, the paste was not cleaned off the dies by the contract manufacturer.

There is no money. The company has been completely undercapitalized from the get-go. I am not sure why it took so long for management to realize this. Some sort of cognitive dissonance set in.   Most of the haphazard decisions and erratic behavior can be explained by a lack of money and hardware that only worked perfectly at about 75% yield. There was also a bit of an obsession with setting the performance bar for hardware at near the theoretical maximum at the expense of yield and reliability.

There was no extravagant spending, no gold plated yachts, Caribbean vacations or anything else. If anything they were fairly cheap. The offices were actually a bargain and a short term lease. Many decisions were made, however, with the expectation of rapid growth. Money was thrown at problems under the assumption that sales would keep rolling in.

Building hardware is expensive. Really expensive. Especially in a hurry, and especially when it doesn't work quite right. So are lawyers.

If there are missing millions, it will be because of outright sloppy accounting.  A tremendous amount of orders were taken in a very short time with nowhere near the amount of financial oversight that should have been present. I would not be surprised if they pull a GOX and find something in a wallet that got overlooked. 

 

Eduardo is out as CEO. This was stated at the hearing if you listened very closely.

Gallo and an attorney for Koi systems called in on the phone.

The judge did not grant the motion for a Chapter 7 Trustee basically because HF said they were preparing their own Chapter 11 Filing. The judge actually referred to the bankruptcy law and conferred with a representative of the US Trustee's office who was present. It would be highly unusual to appoint a trustee in an involuntary Chapter 7 case when it was about to be converted to a Chapter 11. As this is likely to happen next week the judge apparently did not see much point in doing so for only a few days. He allowed the TRO to stay in force as a stopgap measure and made it clear that Hashfast was allowed to continue selling inventory at reasonable market value but was not allowed to do any joint ventures or intra-LLC transfers over the next few days.