Excellent John K. Kumi is a cryptocurrency and fintech enthusiast, operations manager of a fintech platform, writer, researcher, and a huge fan of creative writing. With an Economics background, he finds much interest in the invisible factors that causes price change in anything measured with valuation. He has been in the crypto/blockchain space in the last five (5) years. He mostly watches football highlights and movies in his free time.
Hindenburg stated in their report that Ebang failed in their mining machine business and turned their attention to establishing a cryptocurrency exchange called Ebonex.
Short-seller Hindenburg has once again launched a serious allegation against Ebang International Holdings Inc (NASDAQ: EBON) after previously releasing a full report on Nikola Corporation (NASDAQ: NKLA) calling them an intricate fraud.
According to their research report, Ebang is nothing more than “China Hustle” appearing to the public as a Bitcoin mining play. This has generated a negative response from its investors causing Ebang stock to fall by 13% in the normal trading session on Tuesday. Hindenburg believes that Ebang uses dubious means to channel money to third parties in what they described as a one-way street where the capital has no possibility of coming back.
In the report entitled “Ebang: Yet Another Crypto ‘China Hustle’ Absconding with US Investor Cash”, Hindenburg claims the company has deviated from its promise to investors of using the generated money to develop and expand its operation and instead channeled cash to companies that have something to do with the CEO and its underwriters through “funny” deals. About $103 million has unlawfully been used for bond purchases said to be linked to its underwriters and AMTD with a poor history of fraud and listings that imploded. Not just that, another $21 million offerings which were announced to be used for the business expansion were channeled to someone who was revealed to be a relative of the CEO.
Ebang was founded in 2010 by Dong Hu, who also happens to be the current CEO. Along the way, they launched their first Application Specific Integrated Circuit (ASIC) mining machine, also called Ebit E9+. Ebang previously attempted to be listed on the Hong Kong Stock Exchange but failed due to an alleged sales inflation report with a company called Yindou. Yindou was a Chinese peer-to-peer lending platform. Currently, Yindou is in the hands of prosecutors facing an investigation after failing to pay back an amount of around $676 million.
The Yondou’s founder immediately fled the country, and $79.9 million was channeled to Ebang via the wife of the CFO of Yindou’s account. This amount was said to have been used to inflate the Ebang sales pending their IPO. Yindou investors petitioned the Hong Kong regulators to not approve Ebang’s listing for what they termed as embezzlement of funds. Ebang according to the report is a fraud that has deceived investors enough to raise a good market cap and absconded the investment of US investors.
In addition to the above-mentioned allegations, Hindenburg stated in their report that Ebang failed in their mining machine business and turned their attention to establishing a cryptocurrency exchange called Ebonex. Even in this venture, they forged a volume to look appealing to investors and traders. Though it had no online presence, it forged a volume to be listed as one of the largest spot trading exchanges in the world. After going online in June 2020, they raised $374 million in four offerings from US investors and according to the report, this capital is in no way coming back. Its shares were on a good run after launching the exchange. However, it is not clear the extent of damage this report will do to the company’s reputation and its shares.