Bitmain, the crypto mining giant, had been a flashpoint since its founding five years ago, and a report from CoinDesk today will only add fuel to the fire. The crypto news site says Bitmain may have misled investors in its recent $1B funding round -- a capital raise ahead of Bitmain's anticipated IPO. If the allegations prove true, the IPO itself could be delayed or shelved as Bitmain might face financial liability.
CoinDesk raised the following concern: When soliciting investment in the $1B round, the company sent out pitch decks implying that Digital Sky Technologies Global and GIC Private Limited had both invested in Bitmain. Apparently, that isn't true in either case. CoinDesk found three versions of the pitch deck -- two in English, one the site translated from the Chinese -- that claimed the two entities had invested in the earlier Series B round. At that time, Bitmain raised a whopping $400 million at a valuation of $12 billion. In the recent fundraise, Bitmain reportedly achieved a small bump in valuation to $14B while taking in the additional $1B.
The credibility of Bitmain has been debated endlessly in the crypto universe, especially given the firm's association with the bitcoin cash fork and the belief Bitmain has lost hundreds of millions on the lesser used token. And while Bitmain has remained highly profitable, earning a massive $1.1B in Q1 2018, the swirling allegations may dampen enthusiasm for a forthcoming IPO.
[related id=1]This is especially true given that it isn't the first time Bitmain has been dogged by concerns about misrepresenting who had chosen to invest in the company. Back in August, giants Softbank and Tencent both publicly denied investment in Bitmain after being associated with the pre-IPO round.
If Bitmain represented to investors that it had DST Global and GIC on board when it didn't, both Hong Kong and U.S. regulators could seek to sanction the company. And investors in the deal might have recourse to take legal action against Bitmain. DST Global, in particular, has had a Midas touch in the past — with Russian billionaire Yuri Milner having taken early stakes in Facebook, Alibaba, and AirBnB among others. The idea that investors looking at a Bitmain bet would be impressed that DST was on board hardly seems far-fetched.
Still, it remains unclear how many investors were misled and whether there will be action. On the regulatory side, these allegations will doubtlessly get deeper scrutiny. And CoinDesk notes not all investors may have seen the pitch decks that mention these apparently non-existent investments. (Source: CoinDesk)