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As a result of the decisions taken by the Chinese courts, Bitmain now has more than $1 million worth of assets frozen.
Beijing-based Bitmain Technologies Ltd. had a pretty rough year. Even though the company is still among the key players in China, its market share by hash rate has fallen from ~70% in June to ~66% now. In June 2017, Bitmain’s own data (via Frost and Sullivan) showed that it had a market share of around 75%.
Christopher Bendiksen, head of research at CoinShares and Samuel Gibbons, the research analyst said that Bitmain needs fresh capital in order to fix a series of self-made damages caused by lousy strategic decisions.
“Judging from internal leaks and the financial statements released as part of their failed Hong Kong IPO bid, Bitmain has suffered from serial malinvestment, ranging from failed tape-outs, hardware overproduction, overhiring, and perhaps worst of all, its disastrously performing and likely captive BCH [bitcoin cash] holdings. All these factors have been contributing to balance sheet issues which, according to a recent leaked internal memo by Bitmain chairman and co-founder Jihan Wu, almost sunk the company in early 2019.”
On Tuesday, a local court in China’s Fujian province froze Bitmain’s 3.6 million yuan (~$514,000) worth of stake in its subsidiary Fujian Zhanhua Intelligent Technology Co.
The court decided this freezing will last for three years – from Dec. 16, 2019, to Dec. 16, 2021, without providing a reason. However, some think that it is an attack to one of co-founders Micree Ketuan Zhan, previously rudely expelled by another co-founder Jihan Wu in October.
Also, yesterday, another $680,000 worth of assets were frozen as well, by a district court in Shenzhen that, in a ruling issued on Sept. 27 sided with a company called Dongguan Yongjiang Electronics, allowing a ply for asset protection in a contract dispute with the defendant, Shenzhen Century Cloud Core.
A supplier of electronic device components, Yongjiang, asked the court to freeze 4.7 million yuan (around $676,000), in assets owned by the mining subsidiary to ensure it gets that amount if the court rule in its favor in a trade contract dispute.
Century Cloud Core is fully owned by Beijing Bitmain Technologies acting as a very important subsidiary of the mining giant, doing all the work regarding manufacturing, quality assurance and packaging for Bitmain’s Bitcoin mining equipment.
It is still not known how long both of the freezing situations will be in effect. The thing is, Chinese laws say that this kind of sanctions shouldn’t last longer than six months, with the exception of liquid assets that shouldn’t be held in custody for more than a year.
However, as we already said, these are not the only problems Bitmain has. Last month, during the internal meeting, Jihan Wu confirmed the company had been pushed by suppliers for clearing account payables in December of last year. Just for a reminder, 2018 was pretty bearish for all the crypto and if in April didn’t come to improvement, the company would probably not be able to go through this period.
Wu added that the company recently revamped its sales strategy to make itself look more attractive to mining customers before the Bitcoin’s scheduled halving event in May 2020.
For now, except those two ongoing cases, the rest of the this year’s trade quarrels were all withdrawn by their respective plaintiffs.