Lawsuit says Blockware Solutions sold investors unregistered Bitcoin mining securities

An investor alleges Blockware Solutions and affiliates ran a scheme to sell unregistered Bitcoin mining securities.

A federal lawsuit filed October 7 accuses Bitcoin mining company Blockware Solutions and six co-defendants of selling unregistered investment contracts that the plaintiffs say cost them more than $1.39 million.

The complaint, filed in the US District Court for the Eastern District of Arkansas by Canary Holler Holdings and its sole manager Jordan Jarrett, alleges that Blockware and affiliate Luxor Technology Corporation ran what the filing calls a "coordinated scheme." The defendants sold Bitcoin mining machines bundled with restrictive pooling arrangements, the complaint says, that worked as investment contracts - and therefore securities - under federal law. The filing alleges Blockware never registered them.

The plaintiffs say they sent over $2.6 million to the defendants between November 2024 and July 2026. The complaint alleges they were lured by a financial model it calls the "Mann Spreadsheet," created by Blockware's director of finance as far back as June 2015. According to the filing, the spreadsheet projected "annualized ROI" of 46.35% to 67.90%, assumed Bitcoin would climb 3% every month without pause, held electricity costs flat over four years, and pegged machine uptime at 98% - a target the complaint says Blockware never hit.

Blockware's former CEO personally courted the plaintiffs, the complaint alleges, and kept reassuring them even as losses piled up. When Jarrett told him his machines were losing value "in a bull market," the then-CEO replied, "They aren't in reality," according to the filing. He urged Jarrett to "stay the course."

The complaint also alleges that defendants locked the plaintiffs into a single mining pool - run by co-defendant Luxor Technology - and misrepresented it as "the Blockware Pools." When the plaintiffs asked to switch pools, the then-CEO responded, "We only allow Luxor for now," the filing states.

On June 2, 2026, Blockware's board removed the then-CEO, according to the complaint. A new CEO stepped in - someone the filing identifies as a former chief operating officer at Riot Platforms (NASDAQ: RIOT). During an October 2025 call with the plaintiffs, she described the company's contract posture this way, according to the complaint: "the underlying contracts, most of the time, our services are 'as-is' and screw-off. That is the contract."

The complaint's most pointed allegation is about timing. The filing says defendants repeatedly promised exit options but went dark - canceling calls, ignoring emails, letting weeks pass. The plaintiffs allege this was no accident. According to the complaint, the delays ran out the one-year rescission window under Section 12(a)(1) of the Securities Act, which closed November 25, 2025, for the first batch of machines and December 16, 2025, for the second.

The numbers, as the complaint puts them: total capital in was up to $2,588,010.31. Mining revenue came to roughly 14.271 BTC - worth about $1,190,617.54 at the time of filing. That leaves a net loss of at least $1,397,392.77.

The lawsuit brings 13 counts. They include securities "fraud" under Section 10(b) of the Securities Exchange Act and Rule 10b-5, control-person liability under Section 20(a) against each individual defendant and Luxor, rescission under Section 12(a)(2) of the Securities Act, and violations of the Arkansas Securities Act - which the filing says rise to Class B and Class D felony level. Common-law claims for "actual or constructive fraud," conversion, replevin, and unjust enrichment round out the complaint. Kutak Rock LLP represents the plaintiffs.

For advisors and wealth managers, the central question is familiar: when does a crypto product tip from an equipment sale into a security? The complaint frames it through the Howey test, arguing the plaintiffs invested money in a common enterprise and expected profits from the defendants' efforts. If the court agrees, it could shape how firms structure and sell Bitcoin mining products. The case is also a cautionary example of what happens when clients invest in capital-intensive digital-asset ventures sold with aggressive return projections and limited transparency.

These are allegations in a complaint, and no court has ruled on the claims.