Exiled Bitmain Co-Founder Is Fighting Back With Second Lawsuit

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Micree Ketuan Zhan, the ousted co-founder of Bitmain, has filed one other lawsuit in his struggle to regain management of the bitcoin mining large – this time in his house nation.

A latest discover from the Changle District court docket in China’s Fujian province signifies Zhan has filed a lawsuit in opposition to Bitmain’s fully-owned subsidiary Fujian Zhanhua Intelligence Applied sciences, in addition to Beijing Bitmain Applied sciences as a associated third get together. 

A listening to of the case was scheduled on Feb. 11, based on the discover, though it is possible postponed as a result of disruption brought on by the coronavirus outbreak. Whereas it’s not clear what the precise allegations are, the court docket says the case pertains to a “shareholder qualification affirmation dispute.”

The case provides to the continued litigation within the Cayman Islands Zhan has filed in opposition to the corporate that he co-founded with Jihan Wu in 2013, casting additional uncertainty on the end result of the ability battle on the world’s largest miner maker in addition to its deliberate preliminary public providing within the U.S.

Zhan filed a lawsuit in December within the Caymans, the place Bitmain’s dad or mum holding entity is registered, asking a court docket to void a call allegedly handed at a shareholder assembly that considerably curtailed his voting energy. 

Legal professionals representing Zhan within the Cayman Islands beforehand informed CoinDesk that Zhan, as a serious shareholder, was not conscious of the assembly beforehand, and a listening to for the case is likely to be scheduled after the Easter vacation. 

Asset safety

The lawsuit in China additionally adopted an asset-protection petition filed by Zhan and permitted by the identical court docket in December however the court docket’s full judgement was not made public till final Thursday.

The court docket sided with Zhan to freeze 36 % of Fujian Zhanhua’s 10 million yuan integrated shares owned by Bitmain, value three.6 million yuan, or $500,000. Although the worth of the frozen property could also be negligible for Bitmain, the proportion could possibly be important.

Fujian Zhanhua is 100 % owned by Beijing Bitmain, whose dad or mum firm is Cayman-registered BitMain Applied sciences Holding, of which Zhan stays the most important shareholder – with 36 %. 

Which means Zhan not directly owns 36 % of Fujian Zhanhua, suggesting the asset-protection transfer is meant to forestall his energy over this subsidiary from being transferred or diluted.

Beneath the court docket’s asset-protection order, Beijing Bitmain will be unable to switch or pledge these frozen property as collateral, nor would it not be capable of enhance the subsidiary’s whole integrated capital with the intention to dilute the proportion of the frozen possession. 

However why Fujian Zhanhua?

It might seem stunning that Zhan would file a case in opposition to one subsidiary out of a dozen entities underneath Bitmain’s holding agency, and in a court docket in Fujian, as an alternative of Bitmain’s house base in Beijing. 

However the significance of Fujian Zhanhua might trace at Zhan’s technique for combating again since he was ousted in a coup in November 2019.

To make sure, Zhan, a Fujian native, remains to be the authorized consultant of Fujian Zhanhua, a agency that was ranked 58th by the Fujian provincial authorities in 2018 out of the highest 100 taxpayer corporations. 

And Bitmain’s Hong Kong IPO submitting in 2018 listed Fujian Zhanhua as one of many 4 principal subordinate entities that had made materials contribution to the monetary outcomes of Bitmain’s holding group, alongside Beijing Bitmain, Bitmain Hong Kong and a Shenzhen manufacturing subsidiary.

The doc specified the principal enterprise exercise of Fujian Zhanhua as Bitmain’s “gross sales heart for cryptocurrency mining ” in China. 

Bitmain booked over $2.5 billion in income in 2017 alone, of which about 95 % got here from gross sales of its mining . And the mainland China market counted for practically 50 % of the overall gross sales quantity that 12 months.

The truth is, Bitmain’s two main gross sales channels – the AntMiner pre-sales and post-sales WeChat accounts – have been beforehand owned and operated by Fujian Zhanhua. Nevertheless, the possession for each channels was migrated to a different, lesser-known Bitmain subsidiary in December, whose authorized consultant isn’t Zhan.  

Additional, the IPO doc revealed the Fujian subsidiary performed an important function in certainly one of Bitmain’s financing actions in 2018.

In July 2018, Beijing Bitmain signed a sequence of buy agreements value $100 million to purchase an workplace constructing in Beijing. To finance that transaction, it borrowed $49 million from an area financial institution with the acquired property pledged as collateral and with Fujian Zhanhua as a guarantor, underscoring the monetary wherewithal of the Fujian subsidiary. 

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