The Helium Network – a decentralized telecommunications network powered by crypto – is growing fast, but not everyone has been able to participate in the financial upside.
According to a new class-action lawsuit filed against Parley Labs, a San Diego-based distributor of Helium mining “hotspots,” thousands of would-be miners have faced extensive shipping delays that have left them empty-handed for nearly a year, unable to mine Helium’s native token HNT – and, for many of them, unable to even receive a refund for their orders.
A Helium hotspot is a small device that plugs into a regular electric outlet, taps into existing internet service and extends that Wi-Fi for miles – providing a connection to local devices and acting as a node on the network. Hotspot owners are rewarded in HNT tokens for operating the hotspots.
The ongoing global semiconductor shortage is at least partially to blame for the delays. The impact of the chip shortage has been felt across the electronics industry and has impacted all types of crypto miners – including Helium miners.
Helium boomed in 2021, growing from approximately 14,000 hotspots globally last January to over half a million at the start of 2022. And the growth hasn’t slowed – nearly 80,000 hotspots have come online in the past 30 days, and the network now has over 600,000 hotspots around the world.
Helium is also growing financially. Earlier this month, the company behind the protocol closed a $200 million funding round at $1.2 billion valuation. Helium is backed by major players in the crypto venture capital space, including Andreessen Horowitz, FTX Ventures and Multicoin Capital, and boasts a series of partnerships and integrations with mainstream entities including Dish Network, Lime scooters and the city of San Jose, California.
Though the growing number of hotspots might seem impressive, they represent a small fraction of the Helium miners that have been ordered. According to a representative for Helium, 3.5 million hotspots remain on back-order. And, as the price of the token climbs – nearly 450% in the last year – the people at the other end of those orders are growing increasingly frustrated by what they see as a lost opportunity to get in early.
Different reasons have been offered up to explain the missing hotspots. Representatives for both Helium and Nebra, a U.K.-based manufacturer of hotspots whose equipment is at the center of the lawsuit, both blame the ongoing chip shortage and pandemic-related supply chain issues. Parley Labs, the hotspot distributor at the center of the lawsuit, did not respond to multiple requests for comment, but alluded to issues with its payment processor for the delays in both shipping and issuing refunds during an interview with a crypto YouTuber last month.
In both the lawsuit and on social media, Parley Labs’ customers say they’ve hounded the company for refunds, only to be met with either total silence or stalling techniques. Company representatives told customers they needed to set up a phone call before they could issue a refund but then did not call at the scheduled time, said they had processed refunds that never actually arrived and promised new shipping dates that were never met.
The civil suit accuses Parley Labs and its owner, Bryan Bui-Tuong, of fraud, breach of contract and unjust enrichment.
According to the lawsuit, on Dec. 16, 2021, Parley told its customers that it would issue unilateral refunds due to “uncertainty regarding Nebra’s ability to deliver [hotspots]” and that the process would take up to eight weeks. Plaintiffs in the suit told CoinDesk that they did not receive refunds by the promised deadline – only once they had filed the lawsuit were they approached by Parley about refunds.
Other customers not involved in the suit told CoinDesk that the only way they had been able to get their money back was by disputing the payment with their credit card companies.
“I bought an indoor and outdoor Nebra [hotspot] from Parley and then they just kept pushing back the ship date,” said Bryant Peng, a customer of Parley Labs not involved in the suit.
“Eventually I got sick of it and tried to get a refund, but they refused to help me. I went to my credit card company, and they were able to reverse the charge based on how shady Parley was being,” Peng added.
According to Gerry Grunsfeld, the lead attorney for the plaintiffs, the credit card chargeback option was not an option for his clients because most of them were past the six-month time limit for chargebacks by the time they realized they were being “strung along by Parley.”
More importantly, said Grunsfeld, his clients won’t be satisfied with a simple refund. They feel that they’ve missed out on months of mining opportunity, the chance to get in early or even to flip their hotspots online at a profit.
Upon receiving a refund for his order of two hotspots on Feb. 17 – which was only obtained after the lawsuit was filed, and came a full week after Parley’s promised deadline for blanket refunds for all orders of Nebra-made hotspots – plaintiff Bailey Rosmarin wrote Parley:
“At this juncture, the refund does not make me whole, and I will be proceeding in the lawsuit I have filed against Parley.”
Though customers of Parley Labs have been the most vocal in voicing their disappointment, Parley is not the only distributor or manufacturer of Helium miners facing issues.
Twitter users have complained about extensive delays from other distributors of Nebra-made hotspots, including European electronics distributor Distrelec, as well as delays for hotspots ordered directly from Nebra (though a representative for Nebra told CoinDesk customers have always been kept apprised of shipping delays and refunds are available to anyone who wants one).
Even the biggest manufacturers of Helium hotspots, including China-based Bobcat, have faced lengthy delays – though, according to the lawsuit, Bobcat has fulfilled 99% of hotspot orders placed in April 2021, when the majority of the 14 plaintiffs in the suit placed their first orders with Parley Labs.
In a statement to CoinDesk, a representative for Nebra said that the company’s manufacturing ability has been “severely limited by sudden constraints on component availability” due to the global semiconductor shortage. Despite this, Nebra said it has shipped more than 50,000 miners globally. Over 32,000 Nebra-made hotspots were online at the time of publication.
Brad Lane, a volunteer member of Helium’s Manufacturing Oversight Committee (MOC), confirmed that hotspot manufacturers like Nebra have faced severe shortages.
Lane told CoinDesk that many manufacturers found themselves overwhelmed with demand that exploded from hundreds of hotspots per batch to hundreds of thousands in less than a year – while also battling chip shortages.
“It was kind of the perfect storm,” Lane said. “And the reality is when you’re in a new product field like the hotspots, a lot of the manufacturers are smaller themselves, and they just don’t have as mature supply chain processes in place. They don’t have direct orders with the manufacturers in place. It just became a real challenge.”
Lane also said that the available semiconductors were often snapped up by bigger electronics manufacturers, leaving smaller operations to fight for what was left over or, if they were lucky, reallocate inventory they already had for other products.
“There’s a pecking order in all industries, and this industry is no different,” Lane said.
Wannabe miners aren’t the only ones negatively impacted by the hotspot shortages: the Helium network, which relies on the continued spread of hotspots to extend its Wi-Fi availability, has also suffered.
“We acknowledge that hotspot miner shortages have slowed the growth of the Helium Network overall and we share the frustration that this has brought to the Helium community,” a representative for Helium told CoinDesk.
Lane, however, believes that there’s a light at the end of the chip shortage tunnel.
“There are still challenges in 2022, but I think people are optimistic that the semiconductor industry is going to start catching up, and we’re going to see better availability [of chips] throughout the year,” he said.
But even if manufacturers are able to catch up with the demand, many of the would-be miners burned by the delays have given up on the idea of mining HNT.
“The whole experience left a bad taste,” Peng told CoinDesk. “So I gave up on mining.”
