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Recently, a fierce "confrontation" occurred between Ebang International (EBON.O), a US-listed company, and Huatie Emergency (603300.SH). From real-name reporting to the two sides throwing evidence at each other and holding press conferences, the increasingly intense incident has also attracted frequent attention from regulators.
On August 11, Huatie Emergency issued an announcement that it had received an inquiry letter from the Shanghai Stock Exchange. Three days earlier, Huatie Emergency had received the "Supervision Work Letter" from the Shanghai Stock Exchange.
The fierce "confrontation" between the two listed companies was made public on August 8. At that time, Hu Dong, chairman of Ebang International and Zhejiang Ebang Communication Technology Co., Ltd. (hereinafter referred to as "Ebang Communication"), reported Huatie Emergency by real name for suspected serious financial fraud, serious information disclosure violations, and actual controller Hu Danfeng and his spouse Pan Qian for suspected huge embezzlement and hollowing out of listed company assets.
Ebang Communications said that the spouse of the actual controller embezzled more than 4,000 bitcoins that should have belonged to Huatie Emergency, and these bitcoins are currently worth 1.2 billion yuan.
On the morning of August 9, Huatie Emergency announced that it had received a "Supervision Work Letter" from the Shanghai Stock Exchange and issued an urgent clarification announcement, but it failed to prevent the stock price from falling to the limit that day. At the Huatie Emergency media briefing, Huatie Emergency Chairman Hu Danfeng said: "Bitcoins mined are directly transferred to the lessee's wallet. Ebang Company confused the concepts. The verification of relevant departments proves that we have no problems."
Then on August 10, Yibang directly raised strong doubts about the Huatie Emergency Media Briefing, directly pointing out the "three sins" of Huatie Emergency and releasing the recording of the phone call.
On August 11, Huatie Emergency once again received a letter of concern from the Shanghai Stock Exchange.
Neither side gave in, and under the cloud of suspicion, as of the close of August 11, the total market value of Huatie Emergency had evaporated by approximately 1.7 billion yuan compared to the previous trading day (August 6) before Ebang Communications made the public report.
Is it a mining machine leasing business?
Amid the tense situation in which the regulator sent two letters within a week and Huatie Emergency and Ebang Communications held briefings one after another, a reporter from China Business News learned about the business dealings between the two parties from public disclosure materials and statements from relevant company personnel.
As for the reason for choosing to develop cloud computing server leasing business with Ebang Communication, a person related to Huatie Emergency told reporters: "After going public, the company re-examined its own strategic layout and believed that the company's construction support equipment leasing industry was backed by the construction industry. The company was not optimistic about the future development of the construction industry and hoped to enter the market to develop a more long-term industry, so it chose mining machine leasing."
“Why is there a mining machine rental business? It’s like there are office desks for sale all over the world, but if you just want to rent an office desk, you can find a rental company that provides office desk rental services, and then you just need to pay the rent.” A person in charge of the mining machine business used this example to explain the current mining machine rental business on the market to reporters.
Although this metaphor helps to intuitively understand the mining machine rental business, it is not entirely appropriate. The important difference between leasing a mining machine and leasing office equipment is that after the Bitcoin mining machine is deployed and connected to the power supply, it can obtain virtual currency Bitcoin income through "mining" (using hardware computer systems to lock the corresponding position of Bitcoin through algorithms and collect it).
According to the above-mentioned Huatie Emergency related person, in May 2018, Hu Danfeng and Hu Dong met, and Zhejiang Qirui Machinery Equipment Co., Ltd. (formerly known as Xinjiang Huatie Heng'an Building Safety Technology Co., Ltd., hereinafter referred to as "Qirui Machinery") purchased cloud computing servers from Ebang Communications. "In order to apply for listing and boost sales, Ebang Communications required the signing of a sales contract with a total price of 403.2 million yuan and a quantity of 80,000 units. The contract template was provided by Ebang Communications. After Qirui Machinery purchased the servers, it was mainly used for leasing. After receiving 24,000 servers, due to the plummeting market of Bitcoin, and the quality and performance of the servers delivered by Ebang Communications were inferior to similar products on the market, Qirui Machinery's lessee negotiated many times and the lease contract was terminated early. Qirui Machinery suffered serious losses, so Qirui Machinery clearly stated to Ebang Communications that it would no longer continue to perform the contract.
The dispute between the two parties began. According to the timeline sorted out at the Huatie emergency briefing, on May 19, 2018, Ebang Communications delivered 24,000 servers to Qirui Machinery. In June, Ebang Communications breached the contract and delayed delivery. Qirui Machinery mailed a notice of termination of the contract to Zhejiang Ebang, which was later notarized at the notary office. On October 25, the remaining 56,000 servers were purchased and sold by Ebang Communications and Newbo Industrial.
Ebang Communication filed a lawsuit with the Hangzhou Intermediate People's Court, demanding Qirui Machinery to pay 280 million yuan for 56,000 units, and requiring Huatie Emergency and Hu Danfeng to bear joint and several liability. It also issued a series of statements recently to report and question Huatie Emergency.
In the report, Ebang Communications said that the rental income disclosed by Huatie Emergency could not cover the purchase cost and operating cost (custody fee) of the mining machine. This operating model is doomed to be loss-making and lacks commercial rationality. "The so-called mining machine lessees have never engaged in such business before. They are just "vests" found by Hu Danfeng." In the clarification statement of Huatie Emergency, the reporter saw that Huatie Emergency denied the existence of the so-called "vest".
From the cryptocurrency information website Feixiaohao, we can see that from May to December 2018, Bitcoin fluctuated and fell from around US$9,900 per coin to US$3,200 per coin.
However, a person with many years of experience in the Bitcoin mining machine business told reporters that the company rents out mining machines (cloud computing servers), collects rent and includes it in revenue, while the cost is the operation and maintenance cost (such as electricity bills, etc.) that the server needs to pay to the hosting party. It is reasonable to conduct leasing business through this model. (Note: Due to the large number of mining machine servers, the large area they occupy, and the high power consumption of the machines, before the policy ban was introduced, domestic mining machine servers were generally hosted in areas with low electricity prices.)
Who took the profits from the mining machines?
In the process of pointing out that the "mining machine leasing" business of Huatie Emergency could not be established, Ebang Communication put forward another conclusive opinion: the bitcoins obtained from the "mining" of the mining machine are not controlled by the lessee, but by the actual controller of the lessor (Qirui Machinery, a former subsidiary of Huatie Emergency), Hu Danfeng, and his spouse Pan Qian.
According to media reports, Ebang International uses blockchain tracking technology to enable the company to obtain relevant information about mining machines and the flow of Bitcoin at the first time. Wang Hongyong, executive director of Ebang International, said: "After our investigation, we found that (Pan Qian)'s mobile phone number corresponds to 5 Bitcoin wallet addresses, which belong to different Bitcoin addresses of the same Bitcoin wallet, indicating that these 5 Bitcoin addresses are controlled by the same person."
Huatie Emergency said that the bitcoins "mined" by customers are not controlled by Hu Danfeng and Pan Qian. The Bitcoin wallet address is provided by the lessee, and the income is directly collected by the lessee to the wallet address, which has nothing to do with the mining pool address registered with the mobile phone number.
Hu Danfeng bluntly stated at the media briefing that Ebang Communications publicly reported that Pan Qian obtained more than 4,000 bitcoins. Anyone can register for the bitcoin mining pool, and a mobile phone account is required when registering. Pan Qian registered an observation account to check whether the leased equipment is in operation. "The mined bitcoins are directly transferred to the lessee's wallet. Ebang Communications confused the concept. At that time, the subsidiary suffered operating losses because its income could not cover the electricity bill support. The company's leasing business model is to collect fixed rental returns, and the mined bitcoins belong to the lessor. Both the company and the lessor suffered huge losses, and there is no necessary correlation between the accounts of both parties."
The above-mentioned mining farm personnel did not comment on the proof chain that "Ebang Communications found through investigation that the Bitcoin wallet address belongs to a mobile phone user with the last digit of '9886'".
It is important to understand that a Bitcoin wallet address is a string of characters, just like a bank card number, which represents the user's Bitcoin account. In the Bitcoin network, the transfer of coins in and out of the address is public, but the holder's information is anonymous.
The above-mentioned person told the reporter that it is well known that transactions on the blockchain are anonymous, and the transfer transaction to the wallet address is just a string of characters. The mobile phone number and the wallet address cannot be "derived" from each other. "According to the characteristics of blockchain technology, it is feasible to track the wallet address using tracking technology, and the address transaction details are also public on the Bitcoin network. However, blockchain technology only tracks the amount of Bitcoin inflow and outflow. Generally speaking, only the registrant or the mining machine custodian who performs operation and maintenance management on behalf of the customer can know that the Bitcoin wallet address is related to the mobile phone number. If it is not the above two identities, the mobile phone number cannot be known through blockchain technology alone."
However, a senior executive of a leading mining pool also explained more possibilities to the reporter. In his opinion, if outsiders want to know the relationship between mobile phone numbers and Bitcoin wallet addresses, the premise is that there is a database leak from a service provider, such as data leaked from a Bitcoin exchange. "If a database leaks the correspondence between wallet addresses and mobile phone numbers, then it is possible to find out (the correspondence) by tracking them."
Mining machine transactions are risky
"In view of the transaction management of the industry at that time and the previous transaction habits of Qirui Machinery with other companies in the industry (a leading mining machine manufacturer), payment was made before delivery. Therefore, Qirui Machinery immediately settled the payment of 120.96 million yuan for 24,000 units according to the contract unit price after verbally informing the termination of the contract. Due to the need to apply for listing, Ebang Communications must ship the 56,000 servers that Qirui Machinery no longer fulfills. Therefore, Hu Danfeng introduced Zhejiang Newbo Industrial Co., Ltd. (hereinafter referred to as 'Newbo Industrial') to Ebang Communications to continue the transaction. Ebang Communications approved and delivered 56,000 servers to Newbo Industrial." A relevant person from Huatie Emergency told reporters.
The risks of the mining machine leasing business can also be seen in the clarification statement of Huatie Emergency - under this business model, the mining machines are in the hands of the custodian, and the lessor cannot directly access or monitor the "mining" situation of the equipment in real time.
Huatie Emergency said that the account was used to check the operation of the company's machines and ensure the safe payment of rent. The account set up by Pan Qian can check the operation of its mining. The mobile phone number is only an observer link, used to understand the operation status of the company's rented servers and avoid the risk of server shutdown and misappropriation.
Although the above dispute has not yet been resolved, the reporter learned from the industry that in the Bitcoin mining machine-related industrial chain, the current transaction model between mining machine manufacturers, mine site operators (custodians) and mining machine buyers is full of risks.
According to a mining machine resource docking salesperson who wishes to remain anonymous, it is customary for the buyer to pay part of the payment first. "For example, a 20% deposit is paid first, and the manufacturer sends the goods to a designated mining farm for custody. Sometimes it is a cooperative mining farm, or it may be the manufacturer's own mining farm. If the manufacturer and the mining farm are the same company, the buyer must guard against the situation where the manufacturer and the mining farm "ship the goods themselves and collect them themselves." For the manufacturer, the risk control method is to confiscate the mining machine if the buyer does not pay the remaining balance. In real life, there are also cases where the price of mining machines suddenly drops, the mining machines already in the mining farm depreciate significantly, lose their "mortgage" significance, and the buyer refuses to pay the balance."
Regarding the various disputes between the two parties, an executive of Ebang Communications told reporters: "The company will give a unified response to the concerns (issues), and we will hold another press conference at an appropriate time in the near future." |
