Parties solicited to invest in the pre-initial public offering (IPO) funding round for Bitmain Technologies, Ltd., the leading maker of cryptocurrency mining software and hardware, received pitch decks falsely suggesting the company had secured financial backing from Digital Sky Technologies Global and GIC Private Limited, an investigation by CoinDesk has found.

The question is who put those misrepresentations into the pitch decks. With all three versions that were identified and reviewed, CoinDesk was unable to verify their authenticity independently of their recipients. Bitmain has not responded to multiple inquiries concerning the production and dissemination of the pitch decks, even though all of them printed the company name and a confidentiality warning on each slide, and two versions prescribed deadlines and methods on bank wiring instructions.

One version of the pitch decks, originally written in Chinese and translated into English by CoinDesk, described Bitmain as having “recently completed a $400 million Series B round of financing from Sequoia Capital, DST and GIC, with a pre-investment valuation of $12 billion” and was forwarded by someone claiming to have access to the deal and, without offering proof, knowledge that Bitmain created the pitch deck, says a source who came into possession of the copy.

The other two versions, worded differently and already formatted in English, stated Bitmain had “raised another $400 million at a $12 billion valuation from investors such as Sequoia China, GIC and DST in a Series B round” and circulated in public social media discussions and private email exchanges where one copy was procured from participating in the pre-IPO round, according to another source who claims the pitch deck originated from Bitmain.

CoinDesk learned about the inaccuracy of the statements three days after reporting about Bitmain’s Series B investors on August 10. Jan Wootten, a representative for DST Global, Israeli-Russian billionaire Yuri Milner’s Hong Kong-headquartered technology investment group, notified CoinDesk by email that “DST Global did not invest in Bitmain” and asked for a correction to the article. Josh Lindsfor, a DST Global managing director, confirmed Wootten’s statement in another email weeks later, refuting a DST Global investment across Bitmain’s funding rounds altogether.

The following month, GIC, one of several sovereign wealth funds managed by the Singaporean government, issued the same denial when CoinDesk reached out to a spokesperson for comment. Other investors listed in the pitch decks besides DST Global and GIC were found to be legitimate.

Possible legal implications

The investigation comes after a CoinDesk article last month revealed SoftBank Group and Tencent Holdings did not invest in Bitmain. The report contradicted earlier media items from IPO Zao ZhiDao, a WeChat news outlet popular in China for covering IPOs across the Asian continent.

Following the CoinDesk report, many voices in the cryptocurrency community accused Bitmain of spreading the false claims, but the sourcing for the IPO Zao ZhiDao article has been unclear. IPO Zhao ZhiDao’s pseudonymous author “Uncle C” has refused to comment on the tipster’s identity, and the investment claims have not been published in official investor documents of knowledge to CoinDesk.

However, the link between Bitmain and these latest misrepresentations about DST Global and GIC, while inconclusive, appears to be less tenuous enough to compel a serious reaction from the source who spoke with CoinDesk about receiving an English pitch deck and investing in the pre-IPO round.

The source, who claims a Bitmain investor provided the pitch deck after introducing and co-signing the offer, believed the claims were true when the deal was being finalized and feels sufficiently “unsettled” by the debunked assertions to consider taking legal action against Bitmain, although the response remains to be seen.

If Bitmain is discovered to have been responsible for advertising the false claims in the pitch decks, the legal implications could be significant. In Hong Kong, where Bitmain is physically located, a company that makes false statements “for the purpose of inducing another person to enter into an agreement” could face legal liability for committing “fraudulent or reckless misrepresentation,” said Ashurst LLP legal counsel Hoi Tok Leung.

Depending on the discretion of the Securities and Futures Commission of Hong Kong, Bitmain management could be penalized with up to 7 years in prison, HK$1 million in fines and partial or full monetary damages in investor claims under Hong Kong law, Leung explained, drawing comparisons to the United States Securities and Exchange Commission.

Generally speaking, the S.E.C., or the equivalent regulatory body in the U.S., is also “likely to pursue anyone they believe is fraudulently seeking to raise capital from U.S. investors” on jurisdictional grounds unless “management had a reasonable good faith reason to believe the information to be true at the time,” said Timothy Peterson, a Murphy & McGonigle financial technology law partner and former S.E.C. Division of Enforcement senior counsel.

Still, not every investor has come in contact with the pitch decks containing the false claims, limiting the magnitude of potential legal recourse against Bitmain. A managing director at a Hong Kong venture capital firm that participated in the pre-IPO round of funding who spoke with CoinDesk on condition of anonymity recalls that a pitch deck was not exchanged and DST Global and GIC were not brought up at any point in funding discussions.

The investment opportunity was instead presented at a pitch meeting organized by a group of intermediary investors. “There were a few asset managers who made a bulk [funding channel in] the round and many investors went through them,” the managing director said.

Going public

Mainland Chinese natives Micree Zhan and CEO Jihan Wu co-founded Bitmain in 2013 to build cryptocurrency mining rigs that would run on application-specific integrated circuit (ASIC) chips. Their goal was to out-compete existing mining devices, which performed complex, energy-intensive mathematical computations to crack cryptographic codes and retrieve bitcoins as fast as possible from a distributed digital ledger known as a blockchain.

With the burgeoning cryptocurrency industry since then, Bitmain has experienced booming business by diversifying into the alternative cryptocurrencies ethereum, litecoin, bitcoin cash and siacoin. Bitmain has also profited enormously by running its own mining rigs throughout in-house mining farms that operate in the U.S., China, Europe and the Middle East.

According to investor documents, in the last year alone, Bitmain has raked in billions of dollars from sales of mining equipment and management of mining pools and farms, pouring vast sums of that money into robotics, artificial intelligence and other companies working on blockchain technology.

The explosive growth has also been reflected in the IPO listing Bitmain filed in September for public trading on the Hong Kong Stock Exchange by the beginning of next year, CoinDesk previously reported. The IPO’s market capitalization was valued at somewhere between $40 to $50 billion, making Bitmain one of the fastest-growing cryptocurrency companies and startup unicorns.

But now, in light of these pitch decks, Bitmain could be placed in not only murky financial waters with the recent market slump contributing to excess product inventories, but also legal jeopardy with the company’s plans to go mainstream as the cryptocurrency sector continues to fend off an overwhelmingly negative reputation as an industry rife with credibility problems.

In March, the S.E.C. reportedly subpoenaed 80-something individuals and businesses for suspicious activities associated with initial coin offerings (ICOs), a crowdfunding structure that transacts in cryptocurrency and cryptocurrency-like financial assets.

In late August, the North American Securities Administrators Association announced more than 200 investigations into cryptocurrency operators and businesses throughout the U.S., Canada, Mexico, Puerto Rico and the U.S. Virgin Islands. 70 are actively underway.

Dozens of lawsuits and arrests have been reported worldwide in connection to the cryptocurrency vehicles at the center of these investigations, with areas of interests that include the veracity of marketing statements and promotional materials.

Screenshot of Bitmain miner via the firm’s public Facebook photo album