Mining is to blame! Huatie Emergency was sued in court over a dispute over payment for 56,000 mining machines

Original title: Mining is to blame! Huatie Emergency (10.300, -1.14, -9.97%) was sued in court over a dispute over the payment of 56,000 mining machines, but 1.08 billion yuan in Bitcoin went into the boss's pocket?

Zhu Yiyi, a reporter from 21st Century Business Herald, reported from Hangzhou that with the State Council Financial Committee meeting in May this year clearly proposing to crack down on Bitcoin mining and trading activities, the Bitcoin mining market has also plummeted from a hot market to a cold valley.

After the boom, a series of "aftereffects" emerged, and "mining machine" transaction disputes frequently occurred.

On the afternoon of August 8, EBON International (EBON.US), a US-listed company, held a press conference in Hangzhou. A reporter from 21st Century Business Herald learned on the spot that in May 2018, Zhejiang EBON Communication Technology Co., Ltd. (hereinafter referred to as "EBON Technology"), a subsidiary of EBON International, sold 80,000 mining machines to Xinjiang Huatie Heng'an Building Safety Technology Co., Ltd. (hereinafter referred to as "Xinjiang Huatie"), a wholly-owned subsidiary of A-share listed company Huatie Emergency (603300.SH), for 403.2 million yuan. However, Hu Dong, chairman of EBON International, said, "Since the delivery of 80,000 mining machines, Xinjiang Huatie still has a balance of 282.24 million yuan to be paid."

In its reply to the Shanghai Stock Exchange's inquiry letter in November 2019, Huatie Emergency stated, "As of the end of December 2018, Xinjiang Huatie actually received 24,000 cloud computing servers and paid 120.96 million yuan for the goods before July 18, 2018... Yibang Technology has not fulfilled its supply obligations to Xinjiang Huatie for the remaining 56,000 cloud computing servers, and Xinjiang Huatie has no corresponding payment obligations."

Behind the two parties' different opinions, Yibang Technology filed a lawsuit with the Hangzhou Intermediate People's Court in December 2020, bringing Zhejiang Qirui Machinery Equipment Co., Ltd. (the entity after the name change of Xinjiang Huatie), Huatie Emergency and the company's actual controller Hu Danfeng to court. The case has been heard twice in June this year.

In addition, Hu Dong, chairman of Yibang International, said that he had reported to the Zhejiang Securities Regulatory Bureau last Friday (August 6) that Huatie Emergency was suspected of serious financial fraud and serious information disclosure violations, as well as the actual controller Hu Danfeng and his spouse Pan Qian suspected of massive embezzlement and hollowing out of the listed company's assets and other violations.

On the morning of August 9, Huatie Emergency disclosed that it had received a regulatory work letter from the Shanghai Stock Exchange regarding matters reported by the media, and at the same time issued a clarification announcement, denying the above three allegations. The company mentioned that the dispute between Xinjiang Huatie and Yibang Technology "has been heard but has not yet been decided. The company and other defendants have submitted core evidence to the court to dismiss all the plaintiff's claims."

In this regard, on the morning of August 9, a reporter from 21st Century Business Herald called Huatie Emergency's secretary Guo Haibin, who responded that he would explain the relevant situation later.

Who signed for the 56,000 Bitcoin mining machines?

The transaction between Yibang International and Huatie Emergency dates back to May 2018.

According to the "Product Sales Contract" and "Contract Supplementary Agreement" obtained by a reporter from 21st Century Business Herald, on May 7, 2018, Xinjiang Huatie, a wholly-owned subsidiary of Huatie Emergency, signed a "cloud computing server" procurement contract with Yibang Technology for 80,000 units at a unit price of 5,040 yuan per unit, with a total price of 403.2 million yuan.

On May 30, 2018, the two parties signed a supplementary contract to adjust the payment time nodes, stipulating that Huatie Emergency would pay a total of 403.2 million yuan before October 20, 2018: 80.64 million yuan was to be paid on May 7; 10.08 million yuan was to be paid on May 30, and 20,000 mining machines were to be put into operation; 25.20 million yuan was to be paid on June 15, and 50,000 machines were to be put into operation; 5.04 million yuan was to be paid on June 20, and 10,000 machines were to be put into operation; and the remaining 282.24 million yuan was to be paid before October 20.

On August 8, a person from Ebang Technology told the 21st Century Business Herald reporter that after Xinjiang Huatie paid the first four installments totaling 120.96 million yuan, it shipped cloud computing servers to Inner Mongolia, Sichuan and other places from the end of May to the end of July at the request of Huatie. Among them: 25,000 E9.2 devices and power supplies were shipped to the Xilaifeng site in Wuhai, Inner Mongolia; 10,000 E9.2 devices and power supplies were shipped to the Baoshan site in Wuhai, Inner Mongolia; 16,000 E9.2 devices and power supplies were shipped to Muli County, Xichang, Sichuan; 14,000 E9.2 devices and power supplies were shipped to Butuo County, Xichang, Sichuan; and the delivery of 15,000 E9.2 devices and power supplies to the Jinkang Power Station in Kangding, Sichuan was confirmed through the work group chat records, completing the delivery of all cloud computing servers, and presenting the signature confirmation slips of several Xinjiang Huatie employees on August 17, 2018.

However, during this process, the two sides had a dispute over the payment of the final payment of 282.24 million yuan.

A reporter from 21st Century Business Herald learned that on October 25, 2018, Chen Baoqing, the person in charge of the mining machine business of Xinjiang Huatie, believed that the payment for 24,000 servers had been paid, and did not acknowledge the signing and confirmation of the remaining 56,000 servers. According to his statement, the actual recipient of the 56,000 unpaid servers was the third party Zhejiang Newbo Industrial Co., Ltd.

When Huatie Emergency responded to the Shanghai Stock Exchange's inquiry letter in November 2019, it also stated that there was no corresponding payment obligation for the 56,000 cloud computing servers.

A reporter from 21st Century Business Herald checked public data and found that the ultimate beneficiary of Zhejiang Newbo is the natural person Lv Donghong, who holds 52.17% of the shares. However, behind Zhejiang Newbo may be an affiliate of Hu Danfeng, the actual controller of Huatie Emergency.

Zhejiang Newbo was formerly known as Zhejiang Antie Industrial Co., Ltd. When the company was established in July 2010, Hu Yueting invested 27 million yuan, and increased the capital to 81 million yuan in January 2011. However, in 2012, Hu Yueting disappeared from the list of shareholders of Zhejiang Newbo and transferred his shares to Lv Donghong and others.

Coincidentally, a search of Huatie Emergency's prospectus shows that Hu Danfeng, the actual controller of Huatie Emergency, is the younger brother of Hu Yueting, the spouse of another actual controller Ying Dacheng, and has the same name as Hu Yueting, the original shareholder of Zhejiang Newbo.

After unsuccessful communication with Xinjiang Huatie regarding the sales proceeds of 56,000 "mining machines", Yibang International chose to go to court.

On December 24, 2020, Yibang Technology filed a lawsuit with the Hangzhou Intermediate People's Court on the grounds of "sales contract dispute". There were three defendants, namely Zhejiang Qirui Machinery Equipment Co., Ltd. (the entity after the name change of Xinjiang Huatie), Huatie Emergency and the company's actual controller Hu Danfeng. The case is still under trial.

It is worth mentioning that on March 15 this year, according to the "Notice of Property Preservation" issued by the Hangzhou Intermediate People's Court, it has taken preservation measures on the property of Zhejiang Qirui Machinery Equipment Co., Ltd., and 6 bank accounts of Huatie Emergency have been frozen. In addition, 100% of the equity of Zhejiang Huatie Yushuo Building Support Equipment Co., Ltd., a wholly-owned subsidiary of Huatie Emergency, has been frozen. The freezing period is from March 8, 2021 to March 7, 2022.

On August 3, Huatie Emergency’s announcement finally came out, disclosing the progress of the above-mentioned lawsuit.

Huatie Emergency stated in the announcement, "As of August 2, 2021, the company had 6 general bank accounts frozen, of which the total amount of frozen bank accounts was 3.3088 million yuan. The audited net assets of the frozen subsidiary Zhejiang Huatie Yushuo Building Support Equipment Co., Ltd. in 2020 were 29.8178 million yuan. The total amount of frozen assets is 33.1266 million yuan, accounting for 0.99% of the company's latest audited net assets, which will not have a significant impact on the company's daily operations."

Key roles are hastily sold by listed companies?

Interestingly, in April 2019, Huatie Emergency hastily sold 100% of the shares of Xinjiang Huatie, which was only established in March 2018, for 12.28 million yuan. In September of that year, it was renamed "Zhejiang Qirui Machinery Equipment Co., Ltd." Huatie Emergency emphasized that due to the overall transfer of all shares of Xinjiang Huatie, "subsequent claims and debts have nothing to do with the company."

A reporter from 21st Century Business Herald found out from the announcement that in January 2019, Huatie Emergency announced that it planned to transfer 100% of the equity of Xinjiang Huatie to natural person Ye Gongle for a transfer price of 59.75 million yuan.

The transaction was subsequently shelved. Not long after, in March 2019, Huatie Emergency announced again that it had set aside 142,550 yuan in impairment provisions for Xinjiang Huatie's 2018 fixed assets. At the same time, it planned to transfer 100% of Xinjiang Huatie's equity to natural person Chen Wanlong, and the transfer price was correspondingly reduced from 59.75 million yuan to 12.28 million yuan.

The transaction completed the equity transfer and industrial and commercial change registration procedures at the Kashgar Municipal Market Supervision Bureau of Xinjiang on April 24, 2019.

In this regard, Hu Dong, chairman of Ebang International, questioned at a press conference, "Why did Huatie Emergency transfer Xinjiang Huatie's equity in a hurry? Is the transaction price fair?"

According to the 21st Century Business Herald reporter's inquiry into the annual report, Huatie Emergency responded in the subsequent inquiry letter of the 2018 annual report that the company is engaged in cloud computing server leasing business through Xinjiang Huatie and does not engage in "mining" business itself. In 2018, Xinjiang Huatie's net profit was -158 million yuan.

The business of Xinjiang Huatie, a key player, has also attracted much regulatory attention.

On October 18, 2019, Huatie Emergency received a warning letter from the Zhejiang Securities Regulatory Bureau, which stated that "in 2018, Xinjiang Huatie started cloud computing server leasing business, and the company did not fully disclose the business and fully disclose the risks, and the information disclosure was untimely and inaccurate", and "in the process of Xinjiang Huatie carrying out cloud computing server leasing business, the company had incomplete due diligence on the project, simple project feasibility analysis report, lax project contract review, non-compliant payment of related expenses, and major defects in internal control."

Subsequently, on October 22, 2019, Huatie Emergency received an inquiry letter from the Shanghai Stock Exchange. In its reply in November 2019, it admitted that it used "cloud computing servers" to refer to Bitcoin "mining machines" during the information disclosure process, which was an inaccurate statement and led to insufficient information disclosure and risk disclosure of the company.

In addition, in its reply to the inquiry letter, Huatie Emergency pointed out that "as of the end of December 2018, Xinjiang Huatie actually received 24,000 cloud computing servers and paid 120.96 million yuan before July 18, 2018... As of March 27, 2019, Yibang Technology had not fulfilled its supply obligations to Xinjiang Huatie for the remaining 56,000 cloud computing servers, and Xinjiang Huatie had no corresponding payment obligations... According to the legal opinion of Zhejiang Zeda Law Firm, Xinjiang Huatie Company claimed to terminate the contract due to Yibang Technology's breach of contract obligations."

In a clarification announcement on the morning of August 9, Huatie Emergency said, "According to the "Capital Verification Report of Xinjiang Huatie Heng'an Building Safety Technology Co., Ltd." issued by Lixin Accounting Firm, Xinjiang Huatie's 170 million yuan registered capital has been paid in and its assets are completely independent, which can be clearly distinguished from Huatie Emergency's property. Therefore, the two companies are independent of each other, and Huatie Emergency should not bear joint and several liability for Xinjiang Huatie."

However, Yibang International has a different view.

Regarding the listing of listed company Huatie Emergency as a co-defendant, a 21st Century Business Herald reporter obtained a civil complaint from Ebang Technology, which mentioned that "Xinjiang Huatie is a wholly-owned subsidiary of Huatie Emergency, a one-person limited liability company. Huatie Emergency has the legal obligation to prove that Xinjiang Huatie's property is completely independent of its own property, otherwise it should bear joint and several liability for Xinjiang Huatie's debts."

In addition, Yibang Technology believes that "Xinjiang Huatie was established with funds raised by Huatie Emergency through a private placement of stocks, and its registered capital of 170 million yuan was entirely invested by the raised funds", and in this transaction, Huatie Emergency employees Hu Danfeng and Dong Junna played a core role", and the listed company should bear joint and several repayment liability.

In addition, the clarification announcement on the morning of August 9 mentioned that the company's controlling shareholder Hu Danfeng issued a commitment in his reply to the post-audit inquiry letter of the 2018 annual report, "He will bear joint and several liability for the losses that may be caused to the company by the above-mentioned contract disputes. If Huatie Heng'an requires Yibang Technology to continue to perform or exercise the right to terminate the contract, which causes Huatie Emergency to suffer economic losses, Hu Danfeng will bear joint and several liability."

The mining machine fell into the hands of the actual controller’s wife?

It is worth mentioning that relevant evidence obtained by the reporter of 21st Century Business Herald shows that one of the Bitcoin mining pools, miner numbers, Bitcoin income and Bitcoin wallet addresses corresponding to the mining machines purchased by Xinjiang Huatie all belong to a mobile phone user with the number 139XXXX9886, who happens to be Pan Qian, the wife of Hu Danfeng, the actual controller of Huatie Emergency.

Through technical analysis, it is found that these 5 Bitcoin addresses are different Bitcoin addresses of the same Bitcoin wallet, which means that these 5 Bitcoin addresses are controlled by the same person. At the same time, by querying the above Bitcoin addresses through the Bitcoin blockchain browser (www.btc.com), it is known that the number of Bitcoins obtained from mining is as high as 4418.895748.

Relevant sources pointed out that according to the Bitcoin price on August 3, 2021, the Bitcoin held by Hu Danfeng, the actual controller of Huatie Emergency, and his wife Pan Qian was worth up to RMB 1.08 billion, that is, the income from one of the Bitcoin mining pools generated by the mining machines purchased by Xinjiang Huatie, all went into the personal account of Hu Danfeng's wife Pan Qian.

In this regard, Yibang International believes that Hu Danfeng, the actual controller of Huatie Emergency, and his wife Pan Qian are suspected of seriously embezzling the assets of the listed company.

The 21st Century Business Herald reporter will continue to follow up on the dispute between Yibang International and Huatie Emergency.