Ebang refutes Bitcoin’s “China Hustle” allegations as its share price sinks 20%

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A Nasdaq-listed Chinese Bitcoin mining company’s stock dropped 20% after a damning short story exposed some suspected shady dealings.

The share price of Chinese Bitcoin mining company Ebang continues to sink, as the company refutes allegations made in a Hindenburg Research paper that it was stealing money from American investors.

The Hindenburg Research report, published on Tuesday, described Ebang as “simply the latest chapter in the ‘China Hustle’ disguised as a Bitcoin mining play.” The report alleges that Ebang raised hundreds of millions of dollars through public offerings in the United States under the guise of operating as a Bitcoin (BTC) mining company.

The funds collected in the fundraising rounds were allegedly channelled out of the business into “a series of backdoor transactions with insiders and dubious counterparties.” Ebang bills itself as a “leading Bitcoin mining machine manufacturer,” but according to Hindenburg’s report, the company hasn’t launched a new product since 2019, and its sales have been slowly declining since then.

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Ebang, along with Canaan Creative, is one of only two Chinese Bitcoin mining companies publicly traded on U.S. stock markets. The share price of NASDAQ: EBON has fallen 20% since the start of the week. After trading at $6.35 on Monday, the share price had dropped to $5.00 by Tuesday’s close, equating to 21% losses. The stock has since bounced back to $5.03, leaving weekly losses in excess of 20%.

The Hindenburg report alleges that Ebang saw the writing on the wall for its mining rig business, which was said to produce inferior machines to local competitors. The company is said to have then spun itself into a cryptocurrency exchange, dubbed Ebonex. The initial announcement apparently boosted the EBON market cap up to $922 million.

Hindenburg researchers appear to have discovered that the Ebonex exchange was bought from Blue Helix, a crypto exchange service provider that provides “out-of-the-box” transactions with no money up front.

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Despite having no online footprint, Ebonex miraculously rose to some of the largest trading levels in the world after just a few months in operation. Its allegedly fake numbers are not reported on cryptocurrency market tracking websites like CoinMarketCap or CoinGecko, and Hindenburg describes the whole incident as “just another cautionary tale for novice retail investors.”

The report prompted an official response from Ebang International Holdings Inc, which claimed the review was full of speculation and unsupported claims. The announcement stated that Ebang would examine the claims made by Hindenburg and take the necessary steps to protect its investors.

According to the announcement, “based on an analysis by the Company’s executive committee, we conclude that the Hindenburg Report contains multiple errors, unsupported speculations, and misleading explanations of events.”

“The Board, in collaboration with its Audit Committee, plans to further review and investigate the complaints and misconceptions contained therein, and will take any relevant and reasonable steps might be taken to safeguard the interests of its shareholders,” it said.

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