Allegations of fraud sent the stock of Ebang International Holdings Inc. (Nasdaq: EBON) down nearly 18% to $5.28 per share by midday on Tuesday.
Hindenburg Research released a report today, claiming Ebang “directed much of the cash out of the company through a series of opaque deals with insiders and questionable counterparties,” inflated metrics on its new crypto-exchange platform, and has made no sales of bitcoin mining equipment since May 2019.
The short-seller cites transfers of capital by Ebang to its underwriter, AMTD, as well as a relative of its chairman and chief executive, Dong Hu, soon after completing fundraisings in the United States. Previously, AMTD has been tied to alleged fraud and U.S. IPO flops.
In all, Hindenburg writes, Ebang raised about $374 million from U.S. investors beginning with its $101 million IPO in June 2020. Previously, the company, which calls itself “a blockchain technology company in the global market” and on Monday announced the launch of a cryptocurrency exchange platform that wasn’t available in the United States, sought to become publicly traded in Hong Kong.
As Hindenburg alleges, citing Chinese media reports, Ebang sought to raise up to $1 billion in Hong Kong but the IPO was halted “following involvement in an alleged sales inflation scheme with a company called Yindou.” Yindou, formerly a peer-to-peer lender in China, is known for its 2018 scandals, when its leader was said to have fled the country with $655 million worth of investors’ money.
Further, Hindenburg Research also uncovered certain details concerning the aforementioned crypto exchange, Ebonex. The short-seller writes that Ebang acquired the platform from Blue Helix, a white-label crypto exchange provider, and now “reports what appears to be fictitious volumes” that suggest it to be one of the largest digital currency exchanges in the world. Yet its trading data are not available on FTX or CoinMarketCap.
“Ebang is yet another cautionary tale for inexperienced retail investors enthused by anything crypto-related,” Hindenburg Research writes. “As is so common with other ridiculous China-based schemes, the company will likely keep selling shares as long as investors are willing to keep buying them. We think this is a clear one-way street, and the capital isn’t coming back.”
The report by Hindenburg Research is backed by Ebang’s regulatory filings, Chinese media reports, photos of protestors demonstrating against Ebang’s alleged P2P lending ponzi scheme, and statistical data on AMTD-underwritten IPOs, among other things.