Bitmain Investors Allegedly Misinformed During Pre-IPO Funding Round

Investors in Bitmain's pre-IPO funding round were allegedly given misleading pitch decks containing false claims about past and current investors, and valuations.

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Investors in Bitmain’s pre-IPO funding round were allegedly given misleading pitch decks.

According to an investigative report by Coindesk, the information “falsely” suggested the mining giant had the backing of high profile names like Digital Sky Technologies Global and GIC Private Limited.

Unfortunately, Bitmain has yet to offer any sort of clarification concerning the allegedly ambiguous documents and misrepresentations.

Nevertheless, a bit of digging into the matter reveals three versions of misleading pitch decks, with the company’s name, confidentiality warning, and “prescribed deadlines.” They also gave bank wiring instructions.

What was Bitmain’s false information?

The report points out that one of the versions explained that Bitmain had, at the time, received $400 million in a Series B financing round at a $12 billion pre-money valuation from Sequoia Capital, DST Global, and GIC.

The same information was given in the other two versions, though the report claims that it was said using different wording. These versions, given in English, were then circulated via social media and private email exchanges.

One of the alleged participants in the funding rounds later refuted the claims when news of it appeared in the media. According to DST Global representative Jan Wootten, the alleged investment in Bitmain was false.

The same stance was reinforced by DST Global’s managing director Josh Lindsfor, who has previously emphasized that the investment company had participated in any of Bitmain’s funding rounds.

Since then, other firms listed in the questionable pitch decks have distanced themselves, raising questions as to why the misinformation was allowed to persist.

Among those to refute the claims are SoftBank Group and Chinese tech giant Tencent Holdings, both of which have said they did not invest in the Chinese company.

Possible legal repercussions

If Bitmain is responsible for the misinformation presented in the said pitch decks, then the possibility of legal implications arises.

The mining company has its physical headquarters in Hong Kong, where misinformation is considered fraudulent and is liable for legal recourse. Proof of wrongdoing on the part of the Bitmain management could see them serve a 7-year jail term or face a fine of up to HK$1 million.

There are, however, indications that the false information did not reach every other investor. This aspect potentially limits the scale of damage, meaning Bitmain may not be subject to a crippling legal battle.

Speaking on condition of anonymity, an unnamed managing director at one of Hong Kong’s VC firms has said that their company participated in BitMain’s pre-IPO funding round.

However, the undisclosed individual does not recall a pitch deck being exchanged. Importantly, they also said that both DST Global and GIC did not feature at all during the funding discussions.

Fastest growing crypto firm

Founded in 2013, Bitmain has grown into a giant within the cryptocurrency mining industry, especially for its hold on the manufacture and use of application-specific integrated circuit (ASIC) chips.

With its business booming to see it not only dominate Bitcoin (BTC) mining but also in altcoins like Ethereum (ETH), Litecoin (LTC), bitcoin cash (BCH)and Siacoin.

Bitmain is now valued as a billion dollar company, mainly as a result of its massive revenue from the sale of crypto mining equipment and from its Antpool and BTC.com mining pools.

The company has in the last two years sought to diversify its reach by investing colossal amounts of money in emerging fields like blockchain technology, robotics and artificial intelligence (AI).

The firm’s growth is perhaps better summed up in the fact that it filed for an IPO listing last September. Bitmain chiefs seek to have the company publicly traded on the Hong Kong Stock Exchange in the first quarter of 2019.

Documents showed that Bitmain’s IPO market capitalization was $40 to $50 billion, essentially making the company one of the largest and fastest growing in the cryptocurrency industry.

However, with such allegations of misinformation surfacing, it will be interesting to see how the firm navigates possible hurdles.

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