Reconstructing the 30 million lawsuit between Bitmain and its former employees

Nearly two years after leaving the company and more than a year after running their own mining pool, three former Bitmain employees, Pan Zhibiao, Zhu Yu and Li Tianzhao, sued Bitmain in court over a non-compete agreement - hoping that the court would rule the agreement invalid.

While responding to the lawsuit, Bitmain filed a counterclaim against Pan Zhibiao and three others, demanding approximately US$4 million in compensation from them for violating the non-compete agreement.

A non-compete agreement and $4 million in profits made Bitmain and its three former employees give up the idea of ​​parting ways amicably.

Many people are wondering: Why did both parties choose to go to court now?

Deepchain Finance obtained the video of the trial between the two parties, hoping to restore the whole process of the dispute through the court scene. Currently, the case is still under trial.

Who is the plaintiff and who is the defendant?

Is Bitmain suing its former employees again?

On June 17, an article titled "Bitmain sues former employees and seeks $4 million in compensation from the founder of Biyinsan" brought the mining machine giant Bitmain back into the public eye.

"After doing Shenma, they are now printing coins. No wonder so many people are turning against them," someone commented on Weibo. Previously, Bitmain sued its former employee, Yang Zuoxing, the current CEO of MicroBit, over mining machine patents.

Regarding this matter, DeepChain Finance asked Bitmain and CoinIn Mining Pool respectively, and Bitmain said it would not make an official response. CoinIn Mining Pool COO Zhu Yu told DeepChain Finance that all he could say was: the lawsuit has been going on for a long time and it has no impact on our (CoinIn Mining Pool) normal operations.

Regarding this labor dispute case, CoinDesk reported that the three co-founders of the CoinIn mining pool, Pan Zhibiao, Zhu Yu, and Li Tianzhao, first filed lawsuits against Bitmain separately in order to lift the provisions of the non-competition agreement.

Bitmain then filed counterclaims against Pan Zhibiao and the other two, claiming that the mining pools they operated after leaving Bitmain were in direct competition with their original company and had caused significant losses to the company.

DeepChain Finance obtained the trial video of the lawsuit between Bitmain and Pan Zhibiao and others. As for the purpose of the lawsuit, DeepChain Finance did not find it in the video, but it can be confirmed that it is not "Bitmain suing former employees" as everyone thinks. In this dispute in court, Pan Zhibiao and others are the plaintiffs and Bitmain is the defendant.

Court trial information shows that on April 10, 2015, Pan Zhibiao joined Bitmain as a senior manager of the R&D department and resigned on August 10, 2017. Before his resignation, he was the head of BTC.com.

BTC.com is Bitmain’s mining pool business and brand, founded by Pan Zhibiao and others while they were working at Bitmain.

Zhu Yu, co-founder of the Biyin mining pool, once recalled in his circle of friends the "weird" experience of establishing the mining pool at that time: "Bitmain strongly opposed our establishment of a new mining pool at that time. The so-called positioning of 'Tencent first had QQ and then WeChat' was just wishful thinking at the time."

However, although it did not receive resource support from Bitmain at the beginning, under the leadership of Pan Zhibiao and others, BTC.com became the world's second largest mining pool in just one year.

Core dispute of the case

Judging from the information in the trial video, the focus of both parties in this case is the non-competition agreement.

Before leaving his job on August 10, 2017, Pan Zhibiao signed a non-compete agreement with Bitmain, in which Bitmain promised to pay Pan Zhibiao 19,250 yuan in compensation every month for two years to restrict Pan Zhibiao from engaging in work that competes with Bitmain's BTC.com.

At the trial, Bitmain’s attorney stated that after leaving Bitmain, Pan Zhibiao submitted an employment certificate to Bitmain, and the company was Tangchi Technology.

Bitmain checked the company's business scope and found that it did not have a mining pool business, so the compensation for non-competition was paid normally.

Shenlian Finance searched for Tangchi Technology on Tianyancha. Industrial and commercial information showed that the company was established on July 16, 2014. The company profile was "a virtual currency-related service provider". The major shareholder and legal representative were both Pan Zhibiao.

In fact, if you search for relevant information about Pan Zhibiao on the Internet, you can also see the title of CEO of Tangchi Technology, but his more widely known identity is the co-founder and CEO of Biyin Mining Pool.

Tianyancha information shows that Zhongben Congming (Beijing) Technology Co., Ltd., to which the Biyin mining pool brand belongs, was registered on November 8, 2017. Pan Zhibiao is the major shareholder holding 80% of the shares, while COO Zhu Yu and CTO Li Tianzhao each hold 10% of the shares.

The CoinIn mining pool has risen rapidly since its establishment. According to BTC.com data, in the past year, the CoinIn mining pool accounted for 7.5% of the computing power of the entire network, ranking seventh in the world.

In the view of Bitmain’s attorney, the CoinIn mining pool is in direct competition with Bitmain’s BTC.com, so Pan Zhibiao and others have undoubtedly violated the non-competition agreement.

The lawyers representing Pan Zhibiao and others stated that Bitmain did not pay the non-compete compensation as stipulated in the agreement and was the first to violate the contract, so Pan Zhibiao and others are no longer bound by the non-compete agreement.

"The agreement stipulates that compensation will be paid on a monthly basis before the 15th of each month, in the month of resignation. We believe that the first month's compensation should be paid before August 15, 2017. If it is not paid on time, this agreement will terminate automatically," said the lawyer for Pan Zhibiao and others.

Bitmain paid the first compensation of RMB 13,040.32 to Pan Zhibiao on September 7, 2017. Therefore, in the opinion of the lawyers representing Pan Zhibiao and others, the non-compete agreement signed previously is invalid.

In the opinion of Bitmain’s attorney, the plaintiff’s claims have no legal basis.

"Calculated on a monthly basis, the plaintiff's interests have not been violated in any way. According to the agreement, the delay in payment must reach more than one month (to be considered a breach of contract). The resignation was on August 10, and the payment was on September 7."

Therefore, regarding the non-compete agreement, the lawyers representing both parties focused on the timing and amount of payment of the first month's compensation.

Thereafter, both parties had no dispute over the 19,250 yuan paid to Pan every month.

Why now?

Although the trial showed that Pan Zhibiao and others were the plaintiffs, in fact, the information revealed through the trial showed that the two parties had already conducted labor arbitration before.

According to AI Finance, the previous arbitration ruled that Pan Zhibiao and three others should pay liquidated damages to Bitmain.

Therefore, some people speculate that the original source of this labor dispute may be the labor arbitration applied for by Bitmain.

Pan Zhibiao and others filed a lawsuit against Bitmain because they were dissatisfied with the labor arbitration results, and Bitmain then filed a counterclaim.

Regarding the legal dispute between Bitmain and Pan Zhibiao and others, Liao Xiang, the founder of Bit Gold, believes that this is related to interests.

Liao Xiang told Deepchain Finance that it was mainly the CoinIn mining pool that posed a threat to Bitmain’s business. Bitmain’s mining machines are not the only ones that stand out. Shenma and Avalon mining machines have already caught up in performance, which will lead to the failure of Bitmain’s approach of controlling the ecosystem by selling mining machines and increasing computing power in the next two years.

"The computing power of Bitmain's mining pool mostly comes from its mining machine customers. If the mining pool cannot take the lead, its computing power will become less and less." Liao Xiang said.

Data shows that over the past 12 months, BTC.com’s share has dropped by 8 percentage points from 26% in June 2018 to 18% today.

The mining pool market has experienced more than 8 years of development. Bitmain has come from behind and taken the top spot in the industry with its BTC.com and AntPool. At the same time, the emergence and growth of new forces such as CoinIn Mining Pool and Huobi Mining Pool are eroding Bitmain's market share. In the face of interests, Bitmain will inevitably fight back.

In addition, as mentioned above, this is not the first time that Bitmain has filed a lawsuit against a former employee. Previously, Bitmain had filed a lawsuit against its former chip design director and current Shenzhen MicroBit CEO Yang Zuoxing over patent disputes.

This article is from "Deepchain".