Hall of Shame

Information Technology

Ebang International Holdings Inc. (EBON US)

Year: 2021

Ebang International Holdings Inc is a China-based holding company principally involved in Application Specific Integrated Circuit (ASIC) chip design and the manufacture and sales of Bitcoin mining machines. The Company also provides telecommunication products and management and maintenance services. The Company conducts its businesses in Mainland China, Hong Kong, the United States and other countries.

The company listed on the NASDAQ in June 2020 raising US$100.75M in it's IPO. Additional share offerings between November 2020 and April 2021 raised US$226M; Nov.2020: US$21M, Feb.2021: US$80M, Apr.2021: US$125M.

April 6, 2021 Hindenburg Research published a report "Ebang: Yet Another Crypto “China Hustle” Absconding With U.S. Investor Cash". It said that its research revealed that instead of using capital proceeds to develop its business, Ebang had directed much of the cash out of the company through “a series of opaque deals with insiders and questionable counterparties.” The main issues the research highlighted were:

  • the company directed US$103M, representing approx. US$11M more than its IPO proceeds, into bond purchases linked to its U.S. underwriter, AMTD, which had a track record including:
    • fraud and self-dealing allegations levied against it by one of the largest private equity firms in China and
    • listings that have subsequently imploded.
  • In November 2020, Ebang tapped the market for its first secondary offering, announcing a US$21M raise. It claimed proceeds would go “primarily for development”. Around the same time, the company directed $21 million to repay related-party loans to Ebang Chairman / CEO Dong Hu’s relative.
  • Before going public on NASDAQ in June of 2020, Ebang twice applied for a listing on the Hong Kong Stock Exchange. Multiple media outlets reported that Ebang’s Hong Kong IPO plans were suspended following involvement in an alleged sales inflation scheme with a company called Yindou. The company ultimately failed to list in Hong Kong, twice, owing to customer lawsuits, police investigations relating to embezzlement and other fraud allegations, and public scrutiny over its conduct.
  • Ebang claimed to be a “leading bitcoin mining machine producer”, yet Hindenburg's research indicated this claim was backed by no evidence. Ebang released its final miner in May 2019 and has, since, seen its sales dwindle to near-zero, delivering only 6,000 total miners in the first half of 2020.
  • With its mining machine business failing, Ebang had pivoted the story to a crypto-currency exchange launch called “Ebonex”. Announcements about the exchange added as much as US$922M market capitalisation to Ebang. Hindenburg found that Ebang’s exchange appeared to be purchased from a white-label crypto-exchange provider called Blue Helix that offered out-of-the-box exchanges for as little as no money up-front.
  • Ebonex reported what appears to be fictitious volumes. Despite just launching and having virtually no online presence, Ebonex volume data implied it was one of the largest spot exchanges in the world. Its trading metrics are absent from crypto exchange trackers such as FTX and CoinMarketCap.

Concluding Hindenburg stated that Ebang was yet another cautionary tale for inexperienced retail investors enthused by anything crypto-related. That as was so common with other ridiculous China-based schemes, the company would likely keep selling shares, as long as investors were willing to keep buying them. Hindenburg thought this was a clear one-way street, and the capital was not coming back.

April 7, 2021 Ebang issued a press release which said the Hindenburg report contained many errors, unsupported speculations and inaccurate interpretations of events.

April 13, 2021 Ebang's Chairman issued a letter to the shareholders in which it addressed the issues raised in the Hindenburg report. The company responded to the allegations in the report and gave an update on its business plans and prospects. 

Hindenburg Research: Ebang - Yet Another Crypto “China Hustle” Absconding With U.S. Investor Cash, 6 Apr 2021
Ebang: Open Letter to Shareholders, 13 Apr 2021
Ebang: Unaudited Financial Results for H1 2020 (ME Jun 2020)
Ebang: Prospectus, 25 Jun 2020