- Hindenburg Research says Ebang International is "yet another crypto China hustle."
- The short-seller says Ebang has inflated its crypto exchange volumes and exaggerated mining machine sales.
- Hindenburg also says Ebang's CEO Dong Hu used proceeds from US public offerings to pay off debts to his relatives.
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The short-seller, who recently unraveled Nikola's deal with GM after a scathing report on the EV maker, is targeting Ebang and its CEO Dong Hu with serious allegations of shifting money to relatives to repay loans, mischaracterizing sales in its bitcoin mining machine business, and inflating its crypto exchange volume metrics.
Ebang International is a Hangzhou, China-based manufacturer of bitcoin mining machines that recently launched a bitcoin exchange called "Ebonex."
The company has raised roughly $374 million from US investors in four public offerings since going public in June 2020. Ebang stock hit record highs of $11.78 per share on March 17 before a dramatic fall.
Below Insider details a few of the claims against Ebang in Hindenburg's report:
- Hindenburg says that in November 2020 Ebang tapped the market for its first secondary offering with a $21 million raise claiming proceeds would go "primarily for development". Then, the company repaid $21 million in loans to Ebang Chairman and CEO Dong Hu's relative.
- Hindenburg says Ebang claims to be a "leading bitcoin mining machine producer," but sales have dwindled to just 6,000 units in the first half of 2020, down from over 400,000 in 2018.
- Hindenburg says Ebang twice applied for a listing on the Hong Kong Stock Exchange, attempting to raise as much as $1 billion(which can be confirmed by Reuters reporting), but the firm's Hong Kong IPO plans were suspended following involvement in an alleged sales inflation scheme with a company called Yindou. Ebang had previously informed investors about a loss of 144.9 million yuan due to a failed relationship with Yindou.com.
- Yindou was a Chinese peer-to-peer online lending scheme that defaulted on 20,000 retail investors in 2018 leading $655 million to "vanish into thin air". According to Hindenburg, Chinese prosecutors have been pursuing a criminal case against suspects associated with Yindou. The short-seller report includes images of Chinese protestors in front of Ebang's HQ demanding answers after the Yindou blow-up.
- Hindenburg also alleges that Ebang's crypto exchange, Ebonex, was bought from a "white-label crypto exchange provider called Blue Helix that offers out-of-the-box exchanges for as little as no money up-front." According to the short seller, Ebonex is also reporting "fictitious volumes" that can't be verified on "crypto exchange trackers such as FTX and CoinMarketCap."
These are just a few of the complaints against Ebang International Hindenburg lays out in its research report.
Ebang didn't immediately respond to Insider's request for comment on the short-seller report.
"$EBON is yet another cautionary tale for inexperienced investors. As is common with other China-based schemes, the co. will likely keep selling shares as long as investors are willing to keep buying them. We think this is a clear one-way street & the capital isn't coming back," Hindenburg Research concluded in a Tuesday Twitter post detailing its report.
Ebang stock is down 21.18% as of 9:56 a.m. ET on Tuesday after the release of Hindenburg's report.