Bitmain allegedly accused of association with BitClub Ponzi scheme

Bitmain is advised to cancel U.S. IPO Plans for selling mining equipment to the scandalous Ponzi scheme BitClub Network, which defrauded victims of over $722M. Recent reports suggest that Bitmain is being asked to stop its current activities due to the investigation.

Bitmain and BitClub corporation

About a week ago, BTCKING555 posted a tweet on Twitter that the American Department of Justice was investigating mining firm Bitmain over its association with the Ponzi scheme BitClub. Previously, the New York Times reported that five were charged in association with the scheme in December. Now, the rumor is thickening over Bitmain’s deep involvement with the fraud operation.

Image via pewtrust.org

In late October 2019, it is reported that Bitmain secretly filed for an IPO in the United States with the help of Deutsche Bank. However, this plan may be postponed for a while. An insider revealed that Bitmain is being advised to cancel the plan due to it allowing the victims of BitClub to sue Bitmain for losses. Jihan Wu has also been told not to travel to the United States.

Bitmain problems just continue to accumulate. Samson Mow, Blockstream’s CSO and Pixelmatic’s CEO, also mentioned that Bitmain was recently added to The Information’s list of troubled tech companies. The mining giant plans to cut off some 50% of its employees due to deep internal issues within the company.

Bitcoin Cash affected

It’s undeniable that Bitmain’s legal nightmare will also inevitably impact Bitcoin Cash’s own market price. With $722M in damages put forward against BitClub, and if Bitmain is held partly responsible, it will have the responsibility to pay while struggling with company layoff. That’s why it’s likely that Bitmain will have to liquidate a large portion of its BCH holdings to make up for these losses and that may end up depressing the price of BCH.

At the time of this article, BCH is trading for around $345 and was recently briefly eclipsed by Bitcoin SV (BSV) in market capitalization.

If these allegations against Bitmain come true, and the Department of Justice does press charges, we will have to witness a long and harsh legal battle that will affect the entire blockchain industry for years to come.

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