Over the years, Bitmain's grievances with former employees

Author: Bai Ye

Editor: Qin Jin

Yes, Bitmain, the operator of BTC.com, the world's largest Bitcoin mining pool, has sued its former employees again.

This time, the three founders of Poolin Mining Pool were sued: Pan Zhibiao, Zhu Yu, and Li Tianzhao.

According to the court trial information disclosed by the outside world, Bitmain believes that the above three people are suspected of violating the competition restriction agreement and requires Pan Zhibiao to pay 4.3 million US dollars in compensation. At present, the Beijing Haidian District Court has accepted the case.

Prior to this, Pan Zhibiao, Zhu Yu and Li Tianzhao had sued Bitmain, hoping to be freed from the constraints of the non-competition clause. They believed that since Bitmain did not pay compensation as agreed, they were no longer bound by the non-competition clause, but the relevant case is still being processed.

Bitmain is a "giant" in the cryptocurrency and blockchain industry. They are well-resourced, large-scale, and one of the most "powerful" crypto companies. However, as this case develops, it also gives us an opportunity to take a closer look at how Bitmain treats its former employees.

The love-hate relationship between Bitmain and Pan Zhibiao

There are two important key points in this case: one is the roles played by Pan Zhibiao, Zhu Yu and Li Tianzhao in BTC.com under Bitmain; the other is the non-compete agreement signed by Pan Zhibiao when he left Bitmain.

First, let’s look at the roles played by Pan Zhibiao, Zhu Yu and Li Tianzhao in BTC.com under Bitmain. According to an article Zhu Yu published in January this year to commemorate the 10th anniversary of Bitcoin, he mentioned that he, Pan Zhibiao and Li Tianzhao had all worked at Bitmain, and were initially responsible for the business of Ant Pool.

In 2015, Pan Zhibiao, Zhu Yu and Li Tianzhao proposed to build BTC.com and hoped to separate the mining business from Bitmain and operate it independently. However, this idea was not supported by Bitmain, so Pan Zhibiao decided to develop and promote BTC.com with his own money.

In 2016, Pan Zhibiao announced that the BTC.com code was open source. This was of great significance, not only bringing great help to those who were interested in starting a mining pool business, but also lowering the threshold for launching a mining pool.

In mid-2017, Pan Zhibiao, Zhu Yu and Li Tianzhao announced their departure from Bitmain. When Pan Zhibiao left Bitmain, he signed a non-compete agreement with his former employer (it is unclear whether Zhu Yu and Li Tianzhao also signed a similar agreement), which prohibited Pan Zhibiao from working in Bitcoin mining pools for 24 months. As compensation, Bitmain needed to pay Pan Zhibiao $2,780 per month after his departure.

In November 2017, Pan Zhibiao, Zhu Yu and Li Tianzhao founded Biyin, but they did not provide Bitcoin mining services.

It was not until July 2018 that Biyin began to mine the first Bitcoin block belonging to them.

Data as of February 14, 2019 showed that Biyin became the third largest mining pool in the world in terms of Bitcoin mining power after BTC.com and Ant Pool, and mined 26,825 bitcoins, which is estimated to be approximately US$220 million at current prices.

However, since mid-February this year, CoinMarketCap’s share of Bitcoin mining computing power (about 8.2%) has continued to decline, and its current ranking has dropped to seventh place.

Core employees’ departure angers Bitmain

This is not the first time Bitmain has been involved in a legal dispute with former executives.

In 2017, Bitmain sued its former chip design director Yang Zuoxing, claiming that he had left and joined rival mining equipment maker Bitewei and infringed Bitmain’s patents, demanding Yang Zuoxing pay 26 billion yuan (about $3.8 billion) in added losses, but later reduced the claim to $380,000.

In 2018, Yang Zuoxing successfully revoked Bitmain's disputed technology patent, after which the Xinjiang court handling the case dismissed Bitmain's lawsuit.

This time, Bitmain also demanded a huge amount of compensation from Pan Zhibiao, and also required two other executives of CoinIn to re-perform the non-competition agreement.

According to the disclosed court trial information, Bitmain asked Pan Zhibiao to return all the compensation they had paid and the $666,000 fine. What is even more "terrifying" is that Bitmain claimed that the mining pool company founded by Pan Zhibiao, Zhu Yu and Li Tianzhao after they left directly competed with Bitmain and caused them significant losses, and asked Biyin to compensate Bitmain for their mining profits.

According to Bitmain’s lawyers, the 26,825 bitcoins mined by CoinIn should be regarded as profits generated by a breach of the agreement. Because they cannot accurately calculate the direct and indirect losses caused to Bitmain by CoinIn’s violations, the losses should be calculated based on the profits of the violating party.

This means that the total compensation amount of Biyin will exceed 30 million yuan (about 4.3 million US dollars).

CoinIndex strikes back

Biyin's lawyers believe that according to the previous non-compete agreement, if Party A (Bitmain) does not pay the compensation within one month after Party B (Pan Zhibiao) leaves, it means that Party A has abandoned its obligations. Since Bitmain did not pay the agreed compensation to Pan Zhibiao on time, Pan Zhibiao has no obligation to perform the non-compete agreement.

In addition, the income of Biyin is not necessarily the company's profit, nor is it the loss of BTC.com, and Biyin has not made any profit so far. Biyin's lawyer said that there are many mining pools in the Bitcoin network, and the Bitcoin mining pools that Biyin has not mined do not mean that they will be mined by Bitmain, and they may also be mined by other mining pools.

Bitmain declined to comment or provide further clarification on the status of the case, and CoinIn executives have not yet responded to the matter.

However, the crypto community is disappointed with Bitmain's "crossing the river and demolishing the bridge". Wu Gang, the founder of Bixin, posted in his WeChat Moments: "A Biao is a veteran in the cryptocurrency circle. He founded his own mining pool, Tangchi, in 2014. In terms of mining pool technology, he basically gave back to Bitmain, rather than learning mining pool technology from Bitmain. Another detail is that it seems that Biyin launched Bitcoin a year after he left the company. It is speculated that he was giving three points to his old employer. He helped Bitmain develop BTC.com from scratch and become the world's number one brand, but was eventually asked to pay 4.3 million US dollars in compensation. I guess he must be thinking, "Only the person who drinks the water knows whether it is hot or cold."