B.C. employer’s cryptic accusation against fired worker fails

Lax handling of cryptocurrency accounts left doubt as to where missing digital currency went

B.C. employer’s cryptic accusation against fired worker fails

A British Columbia company’s claim that a fired employee stole cryptocurrency from its account is unfounded, the B.C. Supreme Court has ruled.

MiningSky Technology is a Vancouver-based company that provides hosting services for cryptocurrency miners — individuals or companies who conduct online transactions to earn cryptocurrency rewards. It was founded in 2017 as a spin-off from a company called Vling, a cloud and web-hosting provider.

Zetong Zhang was hired by Vling in late 2016 to help sell its cloud-hosting service. In 2017, he suggested to Vling’s president to use some of the company’s idle servers to mine cryptocurrency. The president authorized Zhang to purchase mining rigs — devices that mine the data. The trial runs were successful and they formed MiningSky, which started providing electricity, internet connections, testing and monitoring of 5,000 mining rigs owned by others, along with a small number of its own mining rigs. All the rigs were housed in a facility in northern B.C.

MiningSky established two accounts on Antpool, a website that pools the effort of multiple miners to increase their probability of earning cryptocurrency and distributes the rewards based on the account’s contribution to the pool effort — one account with full access and a monitoring account to observe the activities of its client miners to see if any weren’t operating. Zhang managed the Antpool accounts.

The president gave Zhang the title of vice-president of MiningSky so he could look after the technical side of the company’s operations. Zhang and the other vice-president were given free reign within their areas of expertise and weren’t watched closely. Zhang, along with other employees, also earned commissions for brining business to the company.

MiningSky set up a digital wallet to hold cryptocurrency, but it wasn’t set up properly and nothing was ever put into it.

Dismissed due to shortage of work

In December 2018, MiningSky terminated the employment of several people, including Zhang, due to a shortage of work. The company gave him a termination letter on Dec. 5 that stated his employment end date was Dec. 20.

Zhang asked about a commission he was owed on a transaction, but MiningSky said it couldn’t pay him yet because the project hadn’t been finished and full payment hadn’t been received from the client.  

On Dec. 11, the president asked Zhang to send the login information for the company’s website manager and Zhang sent a list of all his passwords from his time with Vling to the present. However, when the president tried to login to Antpool, he was asked for a code that had been sent to a particular cellphone. The president assumed it was Zhang’s cellphone. The next day, he asked the company’s network administrator to get information related to MiningSky’s e-currency accounts, and the administrator told him the links were to Zhang’s own personal digital wallet.

Zhang filed an employment standards complaint and on Dec. 19, MiningSky was ordered to pay the outstanding commission.

According to the president, on Zhang’s last day of employment with MiningSky, he told Zhang about the faulty Antpool password and he wanted the information to retrieve the company’s digital currency, but Zhang refused until he received his commission. This standoff continued into January 2019.

In late February 2019, the president discovered that MiningSky’s cryptocurrency was no longer in its digital wallet. An internet search of transactions showed that it had been removed on various different dates over the course of that months. The identity of the recipients wasn’t searchable.

The president didn’t ask any other employees if they had the missing digital wallet because he was “99.9 per cent certain” that Zhang had taken it. He emailed a Vancouver police officer about the missing cryptocurrency — he didn’t mention Zhang’s apparent threat about the commission — but he didn’t receive a reply. He didn’t follow up until four months later, as he was busy.

The president also hadn’t told the CFO of any cryptocurrency accounts, so she was surprised to learn about the missing digital wallet and cryptocurrency.

MiningSky brought an action against Zhang for theft of company property and breach of his employment contract. It claimed that the missing cryptocurrency was worth about $84,000. Zhang denied taking any company property and said that in November 2018 he had been asked to move all mining income from the company’s own miners to a digital wallet address, of which two recipients were associated with the company president. He also denied performing any of the February 2019 transactions, saying they could only have been carried out by the owner of the private key for the destination wallet in the transactions. He believed that the president performed the transactions.

Zhang also claimed that MiningSky had still not paid him the amount owned to him for commission, but he denied threatening to withhold company property until he was paid.

The court found Zhang to be credible, as he was forthright and careful to explain things. MiningSky’s president, however, was less so as he seemed not to be too concerned about the missing crypto currency. He never told the CFO about the accounts, other employees and executives were unaware of the amount missing, he didn’t follow up with the police officer he emailed, and he gave the impression that he was too busy to prioritize retrieval efforts. In addition, the company’s digital wallet wasn’t set up properly in the first place but nothing was done to correct that, said the court.

The court also found that the president never considered the possibility that someone else took the cryptocurrency, despite the lax handling of the accounts, and the credibility issue made it difficult to conclude that Zhang “bluntly refused to hand over company property and information until MiningSky paid his outstanding commission,” particularly since the president never mentioned it when he reported the theft to the police.

“I accept that the outstanding commission owed to [Zhang] might have provided him with a motive to steal the cryptocurrency, but a similar motive could  also be attributed to other employees of MiningSky who had access to the necessary information and who wanted to take advantage of MiningSky’s poor internal controls,” said the court in noting that the case against Zhang was “circumstantial.”

The court determined that MiningSky failed to prove that Zhang too and subsequently withheld information or devices necessary to access the company’s cryptocurrency and dismissed the company’s claim.

For more information, see:

  • MiningSky Technology Ltd. v. Zhang, 2021 BCSC 198 (B.C. S.C.).

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