Bitmain’s legal team have advised the crypto mining equipment manufacturer to set aside their IPO plans due to dark clouds over their association with the $722 million BitClub Network Ponzi scheme. This piece of advice will come as a huge blow to Bitmain who had filed for an IPO in USA back in October 2019.
This recent development comes as little surprise with the hardware manufacturer being put under investigation by the American Department of Justice for their alleged role in the infamous scam. This comes after some five people were charged in December for running the scheme that they deemed “the most transparent company in the history of the world” and “too big to fail”.
Since then, Bitmain has been placed under increased scrutiny as more details continue to emerge from the prosecution. The firm is allegedly believed to have been more deeply involved in the fraudulent scheme that initially thought. If these allegations are proven to be true they will surely jeopardize the future of the company and compromise its leadership. Hence, the advice to shelve the IPO plans seems reasonable.
A Bitmain insider disclosed that the legal advisors asked them to put the IPO on hold as a precautionary measure fearing that the Ponzi scheme victims could sue the company once they went public. This is because Bitmain would be required to disclose the Bitclub case as a ‘material event’ which could then be used to sue for damages by the victims.
The insider also revealed that Jihan Wu, Bitmain co-founder, has been advised not to travel to the USA.
Bitmain seems to be digging themselves into a hole as their problems continue to pile up. Following the recent news, it was also revealed that the company was recently added to The Information’s list of troubled tech companies. Consequently, Bitmain is planning layoff close to half of its employees due to deep lying issues in the organization.
Certainly, the company is not is a good position to conduct an IPO with their problems compounding and a dark cloud hanging over their possible involvement in fraud. Also, given that they are struggling to cut costs, the company may be forced to dig deep to make up for losses and to continue operations. More specifically, if they are held partially responsible with up to $722M in damages owed to the victims.
According Kevin Pham, a crypto insider, Bitmain may be forced to liquidate their massive BCH holdings to pay the costs. This may in turn have major effects on the market as it may massively depress the price of BCH.
$722 million in damages?
Looks like Bitmain will have to liquidate the massive amount of BCH on their balance sheet.
Combine that with BSV eating up all their use cases.
I'm not bullish. 🤢 https://t.co/YwoN8eYEBp
— Kevin Pham (@_Kevin_Pham) January 20, 2020
If the allegations are ascertained, it may result in a long legal battle between Bitmain and the Department of Justice with its effects being felt across the entire blockchain industry for many years from now.
Image Courtesy of Marco Verch on Flickr
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