Bitmain is allegedly in hot water for selling mining equipment to the notorious BitClub Network, an infamous Ponzi scheme which defrauded victims of over $722M. Recent reports suggest that Bitmain is being asked to rescind its U.S. IPO due to the investigation.
Dark clouds are hovering over the hardware manufacturer as an alleged investigation heats up, but the details are still forthcoming.
Bitmain and BitClub Association
About a week ago, BTCKING555 (@btcking555) reported on the American Department of Justice investigating mining giant Bitmain over its association with the Ponzi scheme BitClub. Five were charged in association with the scheme in December, as reported by the New York Times. Now, it seems that the plot is thickening as rumors swell over Bitmain’s deep involvement with the fraud operation once thought to be “too big to fail.”
In late October, BeInCrypto reported that Bitmain quietly filed for an IPO in the United States with the help of Deutsche Bank. However, this idea may have to now be put on hold. An insider is reporting that Bitmain is being advised to cancel their USA IPO due to it allowing the victims of BitClub to sue Bitmain for damages. Jihan Wu has also been directed not to travel to the United States.
The problems for Bitmain just continue to accumulate. Samson Mow (@excellion) also pointed out that Bitmain was recently added to The Information’s list of troubled tech companies. The mining giant plans to layoff some 50% of its workers due to deep internal issues within the company.
Liquidating Bitcoin Cash
It’s undeniable that Bitmain’s legal nightmare will only add to the dark cloud hovering over the company. However, it will also inevitably impact Bitcoin Cash’s own market price. With $722M in damages put forward against BitClub, and if Bitmain is held partly responsible, they will have to reach deep into its pockets to pay. Given that it is currently struggling to cut costs, they may prove difficult. That’s why it’s far more likely that we’ll see Bitmain liquidate a large portion of its BCH holdings to make up for these losses—and that may end up depressing the price of BCH.
If these allegations against Bitmain are proven true, and the Department of Justice does press charges, we can expect a long, painful legal battle that will shake up the entire blockchain industry for years to come.