Bitmain lost money in 2019, lawyers tell court in China

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Lawyers representing Bitmain Technologies disclosed at a recent court hearing that the BTC mining and ASIC hardware titan recorded a loss of nearly $60 million in 2019.

Four ex-Bitmain staffers, whose employment was terminated in early 2020 during Bitmain’s layoff period, sued the firm earlier this year. Their legal claim, brought in China, accused Bitmain of still owing and failing to pay them additional severance, compensation, and bonus payments.

Their total demands for back pay and damages may seem trivial, ranging from $1,500 to $20,000. That did not prevent Bitmain’s lawyer from revealing its 2018 and 2019 financial performance during the hearings’ live stream. Before the admission, those figures had yet to be made publicly available.

Bitmain’s lawyer divulged in a live stream of the court hearing that the company lost nearly 400 million yuan ($61 million) in 2019, a considerable reduction from the 3 billion yuan ($450 million) of profit from 2018. Based on the firm’s earlier IPO prospectus, one can reasonably conclude that the net loss started well before 2019 during the preceding period. 

Looking back retrospectively at the 2018 IPO prospectus showed Bitmain generated $1 billion in profit for the first half of 2018. If the entire year’s yield is roughly $450 million as their lawyer’s declared, Q3 and Q4 of 2018 ended in a loss of more than $500 million as revenue sank. 

The lawyer’s revelation of the financial data was in reply to the former staffers’ allegation that Bitmain breached their employment agreements by not paying out a 13th-month salary and bonus for 2019. Bitmain maintained that issuing a 13th-month pay and bonus is not contractual by law but an internal policy. It is discretionary and depends on Bitmain’s overall business performance. 

Since Bitmain faced a massive downturn in revenue from 2018 to 2019, their lawyers say there were no 13th-month payments or bonuses for any staff in 2019.

The plaintiffs cited reports that Bitmain handed out up to 70,000 yuan (~$11,000) to each employee in May as a special bonus, buoyed by $300 million in revenue generated during the first four months of the year. They allege in the labor lawsuit that ASIC mining hardware manufacturer simply delayed the 2019 bonus until the following May, yet did not pay them what they were entitled. 

To that claim, Bitmain’s lawyer argued the special bonus was, in fact, based on the early 2020 performance during which the company fared better and had nothing to do with 2019.

This case sheds further light on the inside dysfunction within Bitmain, which is no stranger to courtroom proceeding. A bitter internal civil war between the firm’s two founders marked the period in question. Earlier this year, the COVID-19 pandemic caused severe supply chain disruptions at Bitmain and lower revenue levels per BTC block mined. 

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