Lawsuit settled over failed cryptocurrency effort in East Wenatchee

WENATCHEE — A multimillion-dollar lawsuit over a failed Wenatchee Valley cryptocurrency enterprise has settled, about a year after it was filed.

Investors in the collapsed Bitcoin mining company StepChange accepted a roughly $1.5 million settlement with Malachi Salcido of Wenatchee and Salcido Enterprises, ending a lawsuit launched in March 2021 that accused Salcido of mishandling StepChange’s finance to the tuned of about $2.4 million. StepChange, which operated out of the Pangborn Data Center in East Wenatchee, was placed in receivership during the lawsuit.

The settlement was approved Feb. 9 by Chelan County Superior Court Judge Travis Brandt. The court-appointed receiver, Eric D. Orse of Seattle, filed plans to liquefy StepChange’s assets, including its Bitcoin mining rigs, for a cash distribution to the plaintiffs and creditors. A report from the receiver found complex interconnections between StepChange and Salcido’s businesses, and attributed much of StepChange’s failure to the volatile Bitcoin market.

Malachi Salcido incorporated StepChange in 2017. The group of investors put up more than $8 million to establish the Pangborn Data Center in East Wenatchee, where StepChange servers were located. The data center was completed in June 2018, the year Bitcoin values first reached $20,000 per coin. With board approval, Salcido had full oversight of StepChange and received more than $55,000 a month in compensation from the firm.

StepChange’s business accounts were closely intertwined with those of Salcido Enterprises, with Salcido’s company buying or leasing equipment for StepChange and being reimbursed; loaning money to StepChange for needed purchases, including $2.4 million to buy servers; and using StepChange servers for Salcido’s online transactions and then paying StepChange for the practice.

When the value of Bitcoin collapsed to a range of $7,000 to $10,000 per coin in 2020, StepChange was unable to meet its monthly financial obligations. It owed Salcido and his businesses about $2.2 million by the time it ceased operation in March 2020.

While the company was shut down, Salcido applied for and received $150,000 in a COVID-19 Economic Injury Disaster Loan for StepChange from the U.S. government. When the loan came through from the Small Business Administration, Salcido transferred more than $136,000 from StepChange to Salcido Enterprises against money the defunct business still owed.

Malachi Salcido resigned as CEO of StepChange in November 2020. In court filings, attorneys wrote that the investors opted to settle because continued litigation against Salcido and his business interests “would be complex, involving the need for forensic accounting audits of the Salcido Parties’ and Salcido Enterprises’ many affiliates, StepChange’s accounting records, and significant discovery of the many relationships involved in StepChange’s and Salcido’s operations.”