Ebang International Holdings Inc (NASDAQ:EBON) shares slid almost 13% in the regular session on Tuesday after the short seller Hindenburg called the company yet another “China Hustle” disguised as a Bitcoin (BTC) mining play.
What Happened: Hindenburg, the same short-seller that called the automaker Nikola Corporation (NASDAQ:NKLA) an “intricate fraud,” has now alleged in a report that Ebang is “yet another cautionary tale for inexperienced retail investors enthused by anything crypto-related.”
The short seller said that Ebang directed $103 million — nearly $11 million more than its entire IPO proceeds — into bond proceeds linked to its underwriter AMTD.
Hindenburg alleged that AMTD, a Hong-Kong-based firm, has a track record of fraud and faces self-dealing allegations levied against it by a large private equity firm in China and listings “that have subsequently imploded.”
Ebang is accused by Hindenburg of directing the proceeds of its secondary $21 million offering to a relative of its CEO Hu Dong.
Hindenburg said after Ebang failed at its mining machine business it pivoted the story to a cryptocurrency exchange launch called “Ebonex.”
The short-seller alleged that Ebonex reports what appears to be fictitious volume.
“Despite just launching and having virtually no online presence, Ebonex volume data implies it is one of the largest spot exchanges in the world,” wrote Hindenburg.
Why It Matters: According to Hindenburg, Ebang has raised $374 million from U.S. investors in four offerings since it went public in June 2020.
“We think this is a clear one-way street, and the capital isn’t coming back,” said the short seller.
Ebang shares rallied last month after it made the cryptocurrency exchange announcement.
Shares of several cryptocurrency-related companies such as Riot Blockchain (NASDAQ:RIOT), Canaan Inc (NASDAQ:CAN), Sos Ltd. (NYSE:SOS), and Airnet Technology Inc (NASDAQ:ANTE) have risen in the recent past buoyed by a rally in cryptocurrencies themselves.
BTC has risen 97.48% so far this year, while Ethereum (ETH) is up 182.84%. At press-time BTC traded 2.49% lower at $57,839.94 and ETH traded 1.61% lower at $2,107.27.
Price Action: Ebang shares closed 12.91% lower at $5.53 in the regular session on Tuesday and rose 7.23% in the after-hours session to $5.93.
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