First release | Bitmain: Removes Zhan Ketuan from the position of executive director of Century Cloud Core

On July 13, 2020, Beijing Bitmain Technology Co., Ltd. issued an internal letter with the following content:

Letter to all colleagues of Shenzhen Century Cloud Core

All colleagues of Shenzhen Century Cloud Core

As a shareholder holding 100% equity of Shenzhen Century Cloud Core Technology Co., Ltd. ("Century Cloud Core" or "the Company"), Beijing Bitmain Technology Co., Ltd. ("Beijing Bit") has made a shareholder decision on July 8, 2020 to remove Zhan Ketuan from the position of executive director of Century Cloud Core and appoint Mr. Wu Jihan as the executive director of Century Cloud Core; on the same day, Mr. Wu Jihan made an executive director decision to remove Zhou Feng from the position of general manager of Century Cloud Core, and Mr. Wu Jihan himself will concurrently serve as the general manager of Century Cloud Core and the legal representative of Century Cloud Core. In order to improve work efficiency, Mr. Wu Jihan has also appointed Mr. Long Zhengxiang as the acting general manager of Century Cloud Core to perform the management and operation powers of the general manager.

The above is a prudent decision made by Bitmain Group based on the recent actions of Zhan Ketuan, Zhou Feng and others that have continuously damaged the interests of Century Cloud Core and the group and disrupted the business management order. It is also the only choice at present to safeguard the common interests of Century Cloud Core, the group, all employees and customers.

Century Cloud Core has a clear equity structure. The only shareholder of Century Cloud Core is Beijing Bit, and the only shareholder of Beijing Bit is Bitmain Technologies Limited registered in Hong Kong (i.e. "Hong Kong Bit"), and the only shareholder of Hong Kong Bit is BitMain Technologies Holding Company (i.e. "Cayman Bit").

As you all know, on October 28, 2019, Hong Kong Bit made a shareholder decision to appoint Mr. Wu Jihan as the executive director of Beijing Bit, and to remove Mr. Zhan Ketuan from the position of executive director of Beijing Bit. On November 5, 2019, Mr. Wu Jihan made a decision as the executive director of Beijing Bit, to remove Mr. Zhan Ketuan from the position of manager of Beijing Bit, and Mr. Wu Jihan himself will concurrently serve as the manager of Beijing Bit.

From a legal perspective, choosing the company's management is a basic right of shareholders, and I believe you all understand this. But you may not know that at the end of the third quarter of 2019, Bitmain Group's cash flow was already in jeopardy, and the short-term liquidity gap as of the end of October 2019 was as high as hundreds of millions of dollars. If decisive measures had not been taken to replace the management and adjust the business strategy, the group would have collapsed at the end of 2019, let alone survive this year's epidemic.

The relationship between Zhan Ketuan and Zhou Feng is no secret. After removing Zhan Ketuan from his post, Mr. Wu Jihan went to Shenzhen to have a long talk with Zhou Feng. Zhou Feng vowed to obey the shareholders' decision, put the interests of the company first, and continue to take on and do a good job in the management of Century Cloud Core. Mr. Wu Jihan, based on the interests of the company, believed that Zhou Feng was the right person to manage Century Cloud Core and help the company through the difficulties, so he decided to keep the management of Century Cloud Core unchanged.

However, Zhou Feng failed the trust of all his colleagues in the company. Since June 2020, under the instigation of Zhan Ketuan, Zhou Feng refused to ship according to the confirmed orders of the group. On June 16, about 17,000 T17 mining machines were illegally transferred from the warehouse of Century Cloud Core. Hainan Continental Ark Data Technology Co., Ltd., which is outside the Bitmain Group system and in which Zhan Ketuan holds a 25% stake, sold the batch of mining machines at a low price. As a result, Century Cloud Core was completely out of control, and the sales proceeds of about 100 million yuan for the batch of mining machines are still missing.

Subsequently, in order to protect the interests of external customers, after coordination with other shareholders of Cayman Bitmain, the group's sales company Chongqing Silicon Yuan Continental Technology Co., Ltd. ("Chongqing Silicon Yuan") even changed the settlement process and method, and paid the full payment of some goods in advance to the bank account controlled by Zhan Ketuan in exchange for delivery. However, after Century Cloud Core received approximately RMB 109 million in payment and shipped the corresponding goods, it stopped shipping. As of July 8, 2020, more than 5,600 mining machines have been overdue for delivery to external customers, and the number of overdue is increasing every day, causing serious adverse effects on Bitmain's reputation and brand image.

On July 2, Chongqing Silicon Yuan, as an internal customer of the group, ordered nearly 10,000 mining machines from Century Cloud Core through the ERP system and requested that they be shipped on the same day. According to relevant colleagues of Century Cloud Core, 6,000 mining machines had been shipped from the warehouse on July 2. However, Chongqing Silicon Yuan has not received the goods so far, and the batch of goods may have been sent to an unknown mine.

At the same time, Century Cloud's suppliers are unable to get the payments they deserve. Century Cloud currently owes external suppliers an estimated RMB 200 million in overdue accounts payable, including RMB 140,000 in labor contract payables for a group of migrant workers. More than RMB 36 million of bank acceptance bills issued by Century Cloud will expire on July 17, and more than RMB 34 million will expire on July 23. It is understood that after receiving a collection call from the bank, Zhan Ketuan said he would not repay the money, which would destroy the company's and even the entire group's credit with financial institutions.

I believe that everyone has the ability to distinguish right from wrong. The company has done its best for Zhan Ketuan and Zhou Feng. However, their actions violated the law and business ethics, fundamentally betrayed and damaged the interests of the company, disrupted the company's and even the group's business management order, and seriously threatened the common interests of employees, external customers and suppliers. Therefore, it is imperative to replace the management of Shenzhen Yunxin.

Next, Beijing Bit and Century Cloud Core will be committed to implementing shareholder decisions, restoring corporate governance order, and realizing full control of the company by the current management as soon as possible. At present, Mr. Wu Jihan is the legally appointed executive director and general manager of Century Cloud Core, and enjoys the rights of company representative and management. Judging from the previous situation of Beijing Bit, Zhan Ketuan is likely to provoke disputes over changes in Century Cloud Core registration and filing matters, and the possession and custody of seals and certificates, but such disputes do not change the legal effect of the aforementioned shareholder decisions and executive director resolutions. It is only a matter of time before the dispute is finally resolved through legal procedures.

Seals and certificates are merely company management tools and should be kept and used by persons who are authorized to represent and manage the company.

Only when used by such personnel can the seals and certificates represent the true will of the company and the corresponding actions have due legal effect. Whether Zhan Ketuan and Zhou Feng will continue to possess the company's seals and certificates, or whether they are temporarily registered as the company's "legal representative", it does not change the fact that they no longer have the right to act on behalf of the company. Zhan Ketuan, Wei Feng or other personnel who have not been appointed or authorized by Mr. Wu Jihan continue to use the company's seals and certificates, and the intentions expressed in the name of the company are invalid for the company.

In order to restore the normal order of Century Cloud Core as soon as possible, the company hereby makes clear requirements and commitments to all colleagues as follows: First, Zhan Ketuan and Zhou Feng no longer hold any positions in Cayman Bit, Hong Kong Bit, Beijing Bit or Century Cloud Core, and have no right to act on behalf of Century Cloud Core or manage Century Cloud Core. From today onwards, all colleagues shall not continue to follow any instructions from Zhan Ketuan and Zhou Feng, but shall strictly follow the instructions of Mr. Wu Jihan, Mr. Long Zhengxiang and other managers appointed or authorized by them;

Second, Zhan Ketuan and Zhou Feng, with the cooperation of Duan Jiajie, Director of the Delivery Planning Department, and others, did not implement the goods delivery according to the process, illegally delivered and sold the T17 mining machine, causing huge losses of the company's assets. The behavior of these personnel not only violated the company's rules and regulations, but also violated the law by escaping suspicion. The company has issued a serious warning for this, and the final treatment will be determined based on subsequent performance. I ask all colleagues to take this as a warning, insist on doing the right thing, consciously safeguard the interests and asset security of the company, safeguard the reputation of Century Cloud Core and the Group, resist others from illegally transferring the company's assets, keep the company's business secrets, and prevent the company from being completely hollowed out and damaging the interests of all colleagues;

Third, if Zhan Ketuan and Zhou Feng refuse to cooperate with the management handover of Century Cloud Core, and threaten the colleagues who carry out the instructions of the new management with disciplinary measures and termination of labor relations, Century Cloud Core will not recognize the effectiveness of such actions, and will fully and comprehensively protect the rights and interests of the colleagues involved, including guaranteeing the payment of salaries and bonuses, ensuring that social security and provident fund payments are not interrupted, and ensuring that options at the Cayman Bit level are not affected. On the contrary, if any employee continues to carry out the instructions of Zhan Ketuan and Zhou Feng and damages the interests of the company, the company will seriously investigate and punish them;

Fourth, considering the possible complex situations that may arise in the future, in order to avoid direct conflicts between colleagues and each other, to keep the supply chain system running normally as much as possible, and to safeguard the common interests of the company, employees, customers and suppliers, the company may make alternative work arrangements depending on the situation. Please understand and comply with them.

Fifth, given that it may take time for the new management to fully restore Century Cloud's operating and management order, we foresee that Century Cloud's solvency may have a chain reaction. The driving factor behind the gradual improvement in Century Cloud's payment terms in the first half of 2020 - the customer-first value - has now completely reversed. From the perspective of integrity, all colleagues should properly respond to possible inquiries from suppliers, neither avoiding the risk that Century Cloud has already or may further default, and also strengthening suppliers' confidence in Bitmain Group.

If you have any questions, you can ask Mr. Wu Jihan, Mr. Long Zhengxiang and their appointed or authorized personnel at any time, and the company will answer them. The company and Beijing Bit and Hong Kong Bit believe that you will make the right choice, and we are deeply grateful for your understanding and support of the company during this extraordinary period!

Author of this article: Golden Finance Misaki