Biden Order to Halt China-Tied Bitcoin Mine Beside Nuke Base Came as U.S. Firm Just Bought it

CleanSpark had just finished hailing the benefits of its purchase of a Wyoming crypto-mining site when the White House declared that the current operation was a national security threat that must be halted.

The company says it was unaware of the order before buying the properties but intends to move forward with the acquisition.

Order would mark first “the first presidential prohibition relying on the expanded authority over real estate transactions granted to CFIUS and the president.”

An American bitcoin mining company, CleanSpark (CLSK), got caught up in the U.S.-China political war after buying mining sites in Wyoming within close proximity of a U.S. nuclear missile base from MineOne, a company with Chinese ties.

On Monday, President Joe Biden ordered a bitcoin mining facility near Warren Air Force Base in Wyoming to stop operations, citing a threat to national security as it uses foreign-sourced technology. The order said that MineOne is majority-owned by Chinese nationals, and all mining equipment on the property must be removed from within a mile of the military facility in Cheyenne, which houses Minuteman III intercontinental ballistic missiles (ICBMs).

While this may not be a surprising move in itself, the timing stands out, as MineOne sold the sites to CleanSpark less than a week prior to the order.

On May 9, CleanSpark said it was buying two mining sites for nearly $19 million in cash, with a 45-day closing, without naming a specific seller. The miner said it will deploy China-based Bitmain’s latest generation mining machine, noting that it plans to expand the sites by an additional 55 megawatts (MW) from 75MW.

A spokesperson for CleanSpark said the company was unaware of the order prior to buying the mining sites but acknowledged the concerns in the executive order and intends to press forward with the deal.

“The executive order and the involvement of CFIUS, both of which we were unaware of before signing the deal, has added an unexpected layer to the closing process, but we are working through these developments toward a satisfactory closing,” the spokesperson told CoinDesk in a statement.

“We respect the oversight process and are dedicated to ensuring that our operations bolster national security and benefit economic development, particularly in Wyoming, a state that has been at the forefront of developing and nurturing a pro-Bitcoin environment,” the statement said.

Neither MineOne nor lawyers at Loeb & Loeb who handled the property deal for the company responded to requests for comment.

The details of the $19 million deal, though, were fully described in filings to the Securities and Exchange Commission (SEC) from CleanSpark. The purchase was highly dependent on the securing of massive amounts of energy required to run the business.

The larger of the two properties is about 4,000 feet from the closest edge of Warren Air Force Base.

From MineOne, the sale agreement was signed by Jiaming Li, identified as the company’s director. Li, who couldn’t be reached by CoinDesk for comment, has also been president of China Xiangtai Food Co., a partner in TCC Capital and reportedly managed almost $12 billion in assets at Sinatay Insurance Co.

He has a doctorate in economics from Fordham University, according to past press releases. Li was also briefly the president of Bit Origin Ltd., a MineOne investor and a company that was reported to have garnered similar scrutiny previously from Washington.

Due diligence

The SEC-disclosed contract with CleanSpark outlined a due diligence period extending 15 days from the May 8 date the deal was signed, and the purchase could be scrapped if MineOne didn’t satisfy several conditions, including “government compliance matters.”

“I have been deeply involved in National Security affairs for nearly four decades, and am well aware of the potential risks of many different types of encroachment on important defense infrastructure,” said Tom Wood, a CleanSpark board member who once served in senior U.S. Navy roles and as a military analyst, in a statement. “The presence of a CCP-owned data processing facility near a facility like Warren which houses a portion of the nation’s ICBM force is legitimate cause for concern as noted by the president’s order.”

He said he’s familiar with the CFIUS process, calling it “impartial, data-driven and non-arbitrary,” and he said that if the U.S. mining business can address the concerns in the order, “I would consider this a significant win-win for the United States and for CleanSpark.”

This use of Committee on Foreign Investment in the United States (CFIUS) powers to shut down the acquisition by owners tied to China marked the eighth such use of CFIUS – seven of which involved China, according to lawyers at Hogan Lovells who specialize in this issue. Anne Salladin and Brian Curran said in an emailed analysis that this was “the first presidential prohibition relying on the expanded authority over real estate transactions granted to CFIUS and the president under the Foreign Investment Risk Review Modernization Act of 2018.”