Another Bit Digital Company Transforms into Mining and Applying for Re-listing

China Times reporter Wang Yongfei and Ran Xuedong reported from Beijing

The surge in the crypto industry in recent years has attracted companies from many industries to transform and invest in crypto-related businesses, and the magic of the crypto industry lies in its all-encompassing nature.

Influenced by an online meeting held by China's securities regulator on the evening of July 28 with executives of major investment banks to ease market panic, Chinese stocks surged on July 29. Several U.S.-listed companies with blockchain concept stocks also benefited greatly from it, with a sharp rise in prices.

As of the time of writing, BTBT.US rose 35.82% to $8, with a 109.7% increase on July 26. BTCM.US rose 15.92%, BC Technology Group (HK0863) rose 5.08%, Meitu Inc. (HK1357) rose 4.52%, The 9th City (NCTY.US) rose 12.57%, EBON International (EBON.US) rose 9.81%, and Canaan Inc. (CAN.US) rose 18.43%. Compared with the 19.28% drop of BTBT.US, the 15.15% drop of NCTY.US, the 8.68% drop of EBON International (EBON.US) on July 27, it can be said that there has been a big rebound. BTBT.US, which is fully committed to Bitcoin mining, seems to be in its element and has been making frequent moves recently. Released the listing registration statement and prospectus, and reached new cooperation with Digihost Technology Inc. (HSSHF.US).

Many investors may not be familiar with Bit Digital, but many investors may be familiar with Dianniu Financial (Nasdaq: DNJR), the "first Chinese auto loan stock" listed in the United States. Before the transformation to Bitcoin, Bit Digital, then known as Dianniu Financial, was investigated by the Pudong Branch of the Shanghai Public Security Bureau in 2019 for suspected illegal absorption of public deposits.

According to a notice issued by the public security department in March 2020, seven of its senior management members, including Yang Mouhua and Liu Xiaohui, were transferred to the procuratorate for review and prosecution, and 14 related criminal suspects were taken criminal compulsory measures by the public security organs in accordance with the law. Zeng Erxin, the actual controller of "Dianniu Finance", fled to the United States, and the public security organs also issued a red notice through Interpol. The public security organs also froze more than 400,000 yuan in funds in related bank accounts in accordance with the law, and sealed and froze related equity, real estate and other assets involved in the case.

In the context of the company facing delisting and bankruptcy, the Nasdaq Stock Exchange in the United States also announced the suspension of trading in Dianniu Financial's shares. After the case was filed, in order to save itself, it terminated its car loan business and fully transformed into Bitcoin mining; on the other hand, it adjusted its management personnel and was acquired by Yu Hong, an early participant in the encryption industry, chairman and CEO of Quyou Group, initiator of the blockchain Three O'clock community, and initiator of the blockchain XMX project (mining has been suspended and the coin price has returned to zero), and changed its name to "Bit Digital" and the Nasdaq trading code to "BTBT".

According to public information, on April 8, 2020, Bit Digital acquired Xmax Chain Limited ("Xmax Hong Kong"), a wholly-owned subsidiary in Hong Kong. Xmax Hong Kong was purchased by an unrelated third party, and management confirmed that Xmax Hong Kong was established in March 2018. Neither CFO Erke Huang nor Hong Yu, who joined as chief strategy officer and director on April 19, 2020, had any previous relationship with Xmax Hong Kong. On September 1, 2020, the company established BIT Digital USA Inc. ("BT USA") as a wholly-owned subsidiary of Delaware to conduct Bitcoin mining business in the United States.

Following the acquisition of XMAX Hong Kong and the formation of a US entity to operate the old business of Bitcoin mining and disposal of peer-to-peer lending business and related legal entities, the Company is a Cayman entity with a Hong Kong subsidiary, XMAX Hong Kong, and two US subsidiaries, and has no subsidiaries or VIE legal entities in Mainland China.

In mid-July, Bit Digital released a registration statement for listing, stating that on September 8, 2020, the board of directors approved the sale of Point Castle Holdings Limited (the company's former wholly-owned subsidiary in the British Virgin Islands), its subsidiaries and VIE (P2P lending and car rental businesses in China). After divesting the VIE structure, Bit Digital has been preparing a registration statement for listing and a prospectus since the beginning of this year.

Regarding questions about the registration statement for listing after being listed on the U.S. stock market, as of the time of writing, this newspaper's reporter attempted to contact Bit Digital through public information disclosed in the prospectus, but was unable to obtain effective communication.

Public information shows that Bit Digital is currently a New York-based bitcoin mining company, with mining machines mainly deployed in North America, Canada and other places. As of June 30, 2021, it has 32,500 mining machines, with a total of 9,484 mining machines in Yunnan and Sichuan. As of June 30, 2021, the maximum hash value of all mining machines is 1921.07 Ph/s, the hash value in North America is about 1360.95 Ph/s, and the hash value in China is about 560.12 Ph/s.

From mining in February 2020 to June 30, 2021, Bit Digital has obtained a total of 3,086.53 bitcoins.

In a speech in mid-July, Bryan Bullet, CEO of Bit Digital, said: "In the second quarter of 2021, a total of 562.9 bitcoins were obtained and 14,500 mining machines were shipped to the United States. As of June 30, 70.8% of the mining machines have been deployed, shipped or waiting to be installed in North America."

However, J Capital Research issued a short-selling report in January this year, stating that Bit Digital's Bitcoin mining equipment may be "ghost" equipment, without a physical entity. It also provided personal information of Erke Huang, the newly appointed CFO, who is 31 years old, has no accounting qualifications or experience, and is the head of two investment companies. Together with Justin Zhu, the new deputy director of finance who joined on July 21, it is indeed incredible that a listed company with a total number of employees, including all management, is operating a large-scale crypto mining company.