4419 Bitcoins were taken by the actual controller? Huatie Emergency was reported by real name due to mining machine dispute

Original title: 4419 Bitcoins were taken by the actual controller? Due to a mining machine dispute, Huatie Emergency (8.550, -0.12, -1.38%) was reported by real name Source: Investment Times

Due to a sales contract dispute, Huatie Emergency had disclosed a lawsuit announcement with Yibang Technology, involving an amount of 320 million yuan. Now, the chairman of Yibang International has pushed the dispute between the two parties into the spotlight outside the court.

Yu Fei, Researcher of Investment Times

56,000 mining machines and 4,418 bitcoins have put Zhejiang Huatie Emergency Equipment Technology Co., Ltd. (hereinafter referred to as Huatie Emergency, 603300.SH) in the middle of a war of words.

The first to attack Huatie Emergency was Ebang International, a US-listed Bitcoin mining machine giant. On August 8, Ebang International Chairman Hu Dong held a press conference to disclose the report on Huatie Emergency to the outside world.

According to the materials, Huatie Emergency was suspected of serious information disclosure violations, and its actual controller Hu Danfeng and his spouse Pan Qian were suspected of massive embezzlement and hollowing out of the listed company's assets.

Researchers of the Investment Times noted that the dispute between Ebang International and Huatie Emergency had already shown signs. On January 23 this year, Huatie Emergency announced a lawsuit with Zhejiang Ebang Communication Technology Co., Ltd. (hereinafter referred to as Ebang Technology), a subsidiary of Ebang International, due to a sales contract dispute. The amount involved was 320 million yuan. Now, Hu Dong, chairman of Ebang International, has pushed the dispute between the two parties into the spotlight outside the court through a press conference and reporting materials.

In response to Ebang International’s report, Huatie Emergency denied it on August 9, but this did not dispel regulatory concerns. On the evening of August 10, the Shanghai Stock Exchange issued an inquiry letter to Huatie Emergency, asking the company to explain relevant issues. Among them, the report that “the actual controller of the company and his spouse had opened a Bitcoin account, used the mining machines purchased by the listed company to mine, and appropriated the mining pool income generated for themselves” became one of the core concerns of this incident.

Disputes arise when buying mining machines

Huatie Emergency, which was listed on the Shanghai Stock Exchange in May 2015, is mainly engaged in equipment leasing business, and provides leasing and supporting services for construction maintenance equipment, building support equipment and engineering machinery equipment.

In recent years, Huatie Emergency's performance has fluctuated greatly. From 2017 to 2020, the company achieved operating income of 694 million yuan, 888 million yuan, 1.154 billion yuan and 1.524 billion yuan, respectively, and net profits of 32.1765 million yuan, -28.7882 million yuan, 276 million yuan and 323 million yuan, respectively.

In 2018, when the company suffered losses, Huatie Emergency began to consider Bitcoin mining.

According to an announcement by Huatie Emergency, on May 7, 2018, Huatie Emergency's subsidiary Xinjiang Huatie (now renamed Zhejiang Qirui) signed a product sales contract with Ebang Technology, stipulating that Xinjiang Huatie would purchase 80,000 cloud computing servers (i.e. bitcoin mining machines) from Ebang Technology for a total price of RMB 403 million.

After the two parties signed the contract, Xinjiang Huatie paid a total of RMB 121 million in accordance with the contract. Ebang Technology delivered 24,000 units to Xinjiang Huatie in May 2018. However, the two parties had differences over the delivery and destination of the remaining 56,000 mining machines.

Huatie Emergency said that after Xinjiang Huatie urged several times, Ebang Technology refused to deliver the remaining 56,000 mining machines on the grounds that it had fulfilled its delivery obligations. As Ebang Technology failed to fulfill its contractual obligations, Xinjiang Huatie advocated the termination of the contract.

However, Yibang International stated that after the contract was signed, all the goods had been delivered to Xinjiang Huatie, but Xinjiang Huatie still owed 282 million yuan in unpaid goods.

Due to the dispute between the two parties over the delivery of 56,000 mining machines, Ebang Technology sued Xinjiang Huatie, Huatie Emergency and Hu Danfeng, the actual controller of Huatie Emergency, in January 2021. According to Ebang Technology's requirements, Huatie Emergency needs to pay 282 million yuan for the remaining 56,000 mining machines and pay 37.9754 million yuan in overdue payment interest.

It is worth noting that regarding the whereabouts of these 56,000 mining machines, Huatie Emergency said that it has nothing to do with the listed company, but that Yibang Technology sold them to a third-party company called Newbo Industrial.

In response, the Shanghai Stock Exchange requires Huatie Emergency to verify and disclose in additional detail the process and reasons for the transactions between Newbo Industrial and Yibang Technology after the signing of the sales contract between them, as well as the payment status of the relevant transactions, and to explain whether there is an affiliated relationship between Newbo Industrial and Huatie Emergency and its actual controller, and whether Newbo Industrial signed for the relevant servers on behalf of the listed company.

Net profit of Huatie Emergency from 2017 to 2020

Data source: Wind

Reported for suspected information disclosure violations

In addition, Yibang International also reported that Huatie Emergency had information disclosure violations.

The content shows that in the sales contract dispute between Yibang Technology and Huatie Emergency and Hu Danfeng, the Hangzhou Intermediate People's Court accepted the case and opened a trial. On March 15, 2021, the court confirmed that preservation measures had been taken on Huatie Emergency's property. As many as 6 bank accounts of Huatie Emergency were frozen, and the total amount of preservation was ruled to be 320 million yuan.

In April 2019, Beijing Borui Space, the hosting company of mining machines, sued Xinjiang Huatie and Huatie Emergency in Wuhai, Inner Mongolia, because Xinjiang Huatie owed electricity fees for mining. On April 15, 2019, 80% of Xinjiang Huatie’s equity was frozen by the Hainan District Court of Wuhai, Inner Mongolia.

On April 19, 2019, 80% of the equity of Xinjiang Huatie was unfrozen by the Hainan District Court of Inner Mongolia. The reason for the unfreezing was that Huatie Emergency provided an equivalent of RMB 11.3 million in cash as a guarantee, which has been deposited into the court account.

Ebang International said that the above-mentioned case and property preservation have already affected the sustainable operation ability of Huatie Emergency, resulting in possible damage to the rights and interests of investors, but Huatie Emergency did not mention the freezing of the bank account and equity preservation. Moreover, Xinjiang Huatie did not make any disclosure when its equity was frozen by the court, and continued to hold shareholders' meetings to transfer equity, which violated the information disclosure system of listed companies.

In fact, before this, Huatie Emergency and its actual controller Hu Danfeng had been criticized by the Shanghai Stock Exchange for failing to disclose the purchase of mining machines in a timely manner.

On June 10, 2020, the Shanghai Stock Exchange issued a decision to criticize Huatie Emergency and relevant responsible persons. The Shanghai Stock Exchange stated that Huatie Emergency had violated regulations in information disclosure, standardized operations, and the relevant responsible persons had violated regulations in the performance of their duties, and the Zhejiang Securities Regulatory Bureau issued a warning letter for this.

In 2018, Huatie Emergency and Xinjiang Huatie purchased Bitcoin mining machines and accessories for 12 consecutive months with a total amount of 178 million yuan, accounting for 15.62% of the company's latest audited net assets, and the absolute amount exceeded 10 million yuan. According to internal procedures, the company held two meetings of the board of directors' strategic committee in March and May 2018 to review relevant proposals. The above investment amount reached the disclosure standard for temporary announcements, but the company did not disclose it in time. It was not until November 13, 2019 that it disclosed the purchase of Bitcoin mining machines after regulatory inquiries.

Who took the Bitcoin?

It is worth noting that in the reporting materials, there is also an accusation that "the actual controller and his spouse are suspected of massive embezzlement and draining of the listed company's assets."

Ebang International said that after investigation, it was found that one of the bitcoin mining pools, miner numbers, bitcoin earnings and bitcoin wallet addresses corresponding to the mining machines purchased by Xinjiang Huatie all belonged to a mobile phone number. The user of this number was Pan Qian, the wife of Hu Danfeng.

Moreover, there are five Bitcoin wallet addresses corresponding to the above-mentioned mobile phone number. Through the query of the Bitcoin blockchain browser, it is found that the number of Bitcoins obtained from mining is close to 4,419.

According to the Bitcoin price trend on August 3, 2021, the aforementioned Bitcoin is worth as much as RMB 1.08 billion, and the highest price once exceeded RMB 1.8 billion.

Ebang International stated that all the income from the Bitcoin mining pool generated by the mining machines purchased by Xinjiang Huatie went into the personal account of Hu Danfeng's wife Pan Qian. Hu Danfeng and his wife were suspected of massive embezzlement and hollowing out of the listed company's assets.

The above-mentioned report also attracted the attention of the Shanghai Stock Exchange. According to the requirements of the inquiry letter, Huatie Emergency needs to verify and disclose in addition whether the actual controller of the listed company and his spouse hold or have held Bitcoin since 2018. If so, the source of the Bitcoin needs to be explained.

At the same time, Huatie Emergency also needs to answer the above questions and explain whether the actual controller and his spouse have engaged in any behavior that infringes upon the interests of the listed company.