Arkansas Republican Sens. Joshua Bryant of Rogers and Missy Irvin of Mountain View present bills proposing regulations on cryptocurrency mines to the Senate City, County and Local Affairs Committee on Thursday, April 18, 2024. (Tess Vrbin/Arkansas Advocate)
A federal judge in Little Rock has temporarily stopped Arkansas officials from enforcing two laws that target businesses and property owned by Chinese nationals.
Chief U.S. District Judge Kristine Baker issued a temporary restraining order Monday after a hearing on a request for a TRO and preliminary injunction filed Nov. 19 by lawyers for Jones Eagle LLC, a company that operates a digital data center near Dewitt that mines crypto currency.
Jones Eagle filed suit against the state, Arkansas Secretary of Agriculture Wes Ward and Attorney General Tim Griffin on Nov. 13 in the U.S. District Court for the Eastern District of Arkansas. The suit claims the two laws violate the Fourteenth and Fifth Amendments to the U.S. Constitution by denying due process, illegally discriminating against a person based on national origin and depriving a person of just compensation for taking property.
Baker’s order enjoins state officials from enforcing Act 636 of 2023 and Act 174 of 2024 against Jones Eagle or Qimin “Jimmy” Chen, a naturalized U.S. citizen who lives in New York. Chen controls the firm through Eagle Asset Holding Inc., which owns a majority stake in Jones Eagle, according to court documents. The order is effective for 14 days, after which a court hearing on the company’s request for a preliminary injunction and a possible extension of the restraining order will be held.
Act 636 prohibits ownership of property in Arkansas by companies or individuals connected with the Chinese government and several other countries considered adversaries of the United States. It gives the state agriculture department authority to investigate allegations of such ownership and directs the attorney general to take action to force the divestiture of the property through judicial foreclosure.
Act 174 amended the law regulating digital asset mining operations, also known as data centers, and prohibits ownership by “foreign-party-controlled” interests connected to the same countries listed in Act 636.
The case
Ward’s office referred two companies in December 2023 to Griffin’s office for action under Act 636. In a letter to Griffin made part of a press release from Gov. Sarah Huckabee Sanders, Ward wrote about Jones Digital LLC, the previous name of Jones Eagle. The letter notes that a growing number of businesses had created digital asset operations across the state in 2023.
“One of these facilities is located on agricultural land near the city of DeWitt and is operated by Jones Digital LLC. A review of Jones Digital’s ownership indicates that the entity may have significant ties to China. Further, it is believed that the individuals or entities involved in the ownership of Jones Digital LLC may also have significant ownership interest in other digital asset or crypto-mining operations in other parts of the state under different names.”
In a statement attached to Jones Eagle’s request for a restraining order, Chen says that once he learned of the referral to Griffin’s office, he provided the attorney general with documents showing that his firm’s operation is on two acres of leased land. He also says he’s tried to meet with the attorney general’s staff to offer proof of his U.S. citizenship and of his ownership of the company, but has been refused.
Court documents show he filed suit because he believes the attorney general is prepared to take steps against his company that will further harm his business and reputation. The documents refer to an investigative subpoena Griffin’s office filed in circuit court in Baxter County that “suggests imminent substantive enforcement proceedings.”
Chen’s lawsuit alleges that the investigation and referral by Ward’s office were based solely on his Asian name and violates the U.S. Constitution by discriminating against him and his business by virtue of his nation of origin and racial identity.
The state’s enforcement efforts threaten the company’s ability to service its customers and, thus, hinder its ability to thrive, Chen says in the affidavit attached to the TRO motion.
In a statement Tuesday, Chen’s Little Rock attorney Alex Jones said that “because a TRO is usually only granted when a Court believes that a party is likely to succeed on the merits, we are cautiously optimistic that the Court will grant the preliminary injunction. The TRO and preliminary injunction will prevent further harm to our client while we prepare for a trial on the merits where we will get to fully present our case as to why the laws are unconstitutional and reflect legislative overreach.”
Griffin in a statement said he would continue to vigorously defend the constitutionality of Acts 636 and 174.
“I have been investigating a number of crypto mining operations and simply seeking the facts, but not all of the entities have cooperated fully,” Griffin said in the statement.