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Esports site settles lawsuit after allegedly using gamers' computers to mine Bitcoin

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A competitive gaming league that secretly installed Bitcoin-mining software on its members’ computers has agreed to a $1 million settlement with the state of New Jersey to avoid criminal prosecution. 

This settlement is just the latest development in a case stemming back to last spring, when the eSports Entertainment Association (ESEA) installed the mining code on the computers of some of its 600,000 worldwide members. The mining operation generated $3,713.55 worth of the digital currency for ESEA, while at the same time wreaking havoc on some of its users’ hardware. 

Bitcoin mining, which uses a computer’s processing power to do the complex math that brings new bitcoins into the economy, is usually done with a specialized “mining rig.” Many of the victims report fried graphics cards and other damage to their gaming PCs as a result of the organization's actions.

When complaints first began to appear on ESEA message boards, cofounder Eric Thunberg originally feigned ignorance before trying play off the fiasco as a poorly executed April Fools’ Day joke. Since then, the blame has shifted to a rogue employee

Thunberg and the other organizers have tried to make amends by donating the ill gotten bitcoins to charity, adding additional funds to next year's prize pool and giving gamers a free month of membership, but that wasn't enough for the state of New Jersey, which began a criminal investigation into the matter. This settlement brings that investigation to a close without formal criminal charges or ESEA having to admit to any wrongdoing.

“This is an important settlement for New Jersey consumers,” Acting State Attorney General John J. Hoffman said in a statement. “These defendants illegally hijacked thousands of people’s personal computers without their knowledge or consent, and in doing so gained the ability to monitor their activities, mine for virtual currency that had real dollar value, and otherwise invade and damage their computers."

Hoffman was acting on behalf of 14,000 computer owners across New Jersey and the United States who allegedly had their machines used as part of the Bitcoin mining operation. 

Under the terms of the settlement, ESEA, which organizes competitive tournaments for games like Starcraft 2, Counter-Strike, and League of Legends, has "agreed to refrain from deploying software code that downloads to consumers’ computers without their knowledge and authorization." The company will also have to submit to a 10-year compliance program and establish a dedicated page on its website to specify the type of data it collects, how the information is collected, and the manner in which it's used.

If ESEA is able to meet these terms and conditions over the next decade, the company will only have to pay $325,000 of the $1 million settlement obligation. 

Despite consenting to the agreement, Thunberg issued a strongly worded statement to Ars Technica rebuking the attorney general's account of what transpired.

"We want to make it clear to our community that we do not agree with the Attorney General's account of the Bitcoin incident.

"The settlement that was signed makes explicitly clear that we do not agree, nor do we admit, to any of the State of New Jersey's allegations. The press release issued by the Attorney General about our settlement represents a deep misunderstanding of the facts of the case, the nature of our business, and the technology in question." 

This is not the end of ESEA's legal troubles however. A class action suit against the company, filed in California, is still ongoing. 

Photo via walt74/Flickr