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Binance France Replaces Changpeng Zhao with New Shareholders

Hassan Shittu
Last updated: | 2 min read
Riot Platforms Makes Second Bid with $950M to Acquire Bitfarms Bitcoin miner Riot Platforms has announced a proposal to acquire its Canadian competitor Bitfarms at a significant premium. The Colorado-based company, which already holds a 9.25% stake in Bitfarms, made an offer to the Bitfarms board on April 22, which was subsequently rejected. Following this, Riot has gone public with its intentions. Riot Offers $950 Million in Cash and Stock for Bitfarms Amid Internal Turmoil and CEO Lawsuit According to a recent report by Bloomberg, Riot's offer includes a mix of cash and common stock, valuing Bitfarms at approximately $950 million in equity. This represents a 24% premium over Bitfarms' one-month volume-weighted average share price as of May 24, 2024. Riot has also revealed that it has acquired a 9.25% stake in Bitfarms, becoming the company's largest shareholder. The proposed acquisition would combine cash and Riot common stock, resulting in Bitfarms shareholders owning up to 17% of the merged entity. Riot stated that this proposal offers Bitfarms shareholders substantial immediate value and potential for future growth within a financially robust company led by a proven management team. The initial proposal was privately submitted to the Bitfarms Board of Directors on April 22, 2024, but was rejected without substantive discussion. Following this, Riot has decided to make the proposal public, citing new allegations from a lawsuit filed by Bitfarms’ recently terminated CEO, which question the commitment of certain directors to shareholder interests. The acquisition offer comes at a tumultuous time for Bitfarms, which is undergoing significant management changes. The company is in the process of finding a new CEO following the departure of Geoffrey Morphy. Initially, Morphy was to remain with the company during the search for his successor. However, on May 10, Morphy sued Bitfarms for breach of contract, wrongful dismissal, and damages amounting to $27 million. Consequently, he was dismissed on May 13, and chairman and co-founder Nicolas Bonta was appointed as interim CEO. Riot has raised concerns over these internal disputes, specifically questioning the commitment of directors Bonta and Emiliano Grodzki to act in the best interests of all shareholders. Riot has indicated plans to requisition a special shareholders meeting after Bitfarms' May 31 Annual General and Special Meeting to propose the addition of new, independent directors to the Bitfarms board. Benjamin Yi, Executive Chairman of Riot, expressed disappointment over the rejection, stating, "We were disappointed to learn that the Bitfarms Board rejected our compelling Proposal without engaging in substantive dialogue with us. We are confident that Bitfarms’ shareholders will agree that this Proposal represents a significantly more attractive alternative for Bitfarms than its standalone trajectory." Riot Proposes Acquisition of Bitfarms to Form World’s Largest Public Bitcoin Miner Amidst Financial Struggles Bitfarms has faced financial difficulties, reporting disappointing earnings in 2023, partly due to a costly technical upgrade in preparation for the upcoming Bitcoin halving. Despite analysts' positive outlook for post-halving performance, Bitfarms' earnings in April 2024 dropped by 29% compared to the previous year. In contrast, Riot reported a significant 131% increase in net income for the first quarter of 2024, reaching $211 million. The proposed acquisition aims to create the world's largest publicly listed Bitcoin miner, with significant geographic diversification and enhanced growth potential. The combined company would manage 15 facilities across the U.S., Canada, Paraguay, and Argentina, with a projected total power capacity of 2.2 GW when fully developed. Riot highlighted the potential combined capacity of the two companies, stating that the merger would create the largest publicly listed Bitcoin miner with: "Approximately 1 GW of current power capacity and 19.6 EH/s of current self-mining capacity, with up to 1.5 GW of power capacity and 52 EH/s of self-mining capacity by year-end." Riot's strong financial position, with over US$700 million in cash and 8,872 unencumbered Bitcoin, is expected to support Bitfarms' growth plans. Riot believes that the merger would unlock access to public equity markets for Bitfarms, similar to the benefits Riot currently enjoys. Riot plans to requisition a Special Meeting of Bitfarms’ shareholders following the company's Annual General and Special Meeting on May 31, 2024, to propose the addition of new, independent directors to the Bitfarms Board

Binance France has replaced co-founder Changpeng Zhao with two new shareholders to maintain its operational status in France and comply with local regulations in the European Union’s second-largest economy.

This unexpected move follows Zhao’s legal issues. It is part of a broader effort to align with European Union standards as new regulatory frameworks like the Markets in Crypto-Assets (MiCA) regulation take effect.

Change of Ownership in Shareholders of Binance France

Changpeng Zhao, also known as CZ, previously owned 100% of Binance France. However, following his guilty plea for violating US banking laws last November, Binance needed to restructure its ownership to comply with French regulations and safeguard its operational status in the EU.

Under these regulations, a company’s majority shareholder cannot have a criminal record. Binance has introduced Yulong Yan and Lihua He as the new majority shareholders of Binance France, each holding 50% of the shares. Both are co-founding team members of Binance.

Yulong Yan, also known as Allan Yan, was identified in the original Binance whitepaper and was a co-founder and product director of Bijie Tech, a Chinese exchange services company that was shut down by the Chinese government in 2017.

Although Lihua He was not mentioned in the 2017 Binance whitepaper, he remains an enigmatic figure with little publicly available information. A Binance spokesperson declined to provide further details about Lihua He or whether Zhao was compensated for his shares.

This shareholder transition is part of Binance’s broader “global restructuring project” to align with regulatory standards across different jurisdictions. The restructuring is crucial for maintaining Binance’s operational legitimacy in France and, by extension, within the EU as new regulatory frameworks like the Markets in Crypto-Assets (MiCA) regulation emerge. The MiCA regulation, which will be fully implemented over the next two years, allows crypto companies to “passport” their license from one EU country to operate across all 27 member nations.

France has been a strategic hub for Binance in Europe, with significant investments and high-profile events in Paris.However, Zhao’s criminal conviction and ongoing investigations into Binance for potential money laundering and unauthorized advertising created uncertainty over Binance’s ability to secure a MiCA license.

Additionally, Binance faces two investigations from French prosecutors about potential money laundering and premature advertising practices.

Binance Amid Regulatory Scrutiny

Binance, also the largest shareholder of South Korean cryptocurrency exchange Gopax, recently sold the asset claims of Gopax victims at less than half their face value on May 27, leading to substantial financial losses for investors. This sale contradicted Binance’s earlier promise to fully compensate victims of the ‘GoFi’ virtual asset deposit service, which had suspended fund withdrawals and owed around KRW 70 billion ($52 million).

Instead of using its funds to cover these losses, Binance sold the claims at a discount amid rising cryptocurrency prices, increasing GoFi’s debt to an estimated KRW 100 billion ($75 million). Investor discontent has grown, especially since Genesis, the service associated with Gopax, had its bankruptcy compensation plan approved, committing to return 77% of bond funds to creditors.

Despite regulatory scrutiny, Cristiano Ronaldo, the well-known Portuguese footballer, recently announced his collaboration with Binance to launch his fourth NFT collection. The collection will be unveiled on May 29 on the Binance NFT Marketplace.