Shares of Chinese Bitcoin mining machine manufacturer Ebang fell sharply on Tuesday following a report from Hindenburg Capital that claims the firm misled investors about investment allocations.
A lengthy report from Hindenburg Capital alleges that, of the roughly $375 million the mining machine manufacturer raised from investors since going public in June 2020, some $103 million went toward “bond purchases linked to its U.S. underwriter.”
Shares of Ebang were down over 15% on the news.
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The report also claims that the company “directed $21 million to repay related-party loans to Ebang Chairman/CEO Dong Hu’s relative.” Additionally, the report says that its mining machine business is faltering, only producing 6,000 machines in the first half of 2020.
To shore up its mining business (or, as Hindenburg put it, to “pivot the story”), Ebang launched a cryptocurrency exchange called Ebonex yesterday.
Ebang did not respond to CoinDesk’s request for comment by press time.
Hindenburg took out a short position following its research, the report discloses, and the firm attempts to use Ebang as an example of caveat emptor for Western investors jumping at publicly traded crypto stocks before doing their due diligence.
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