Crypto

How The Bitmain Funding Story Was Muddled

Following initial reports from June 2018 that Bitmain raised $400 million in funding from a highfalutin crop of VCs, supposed investors in the blockchain mining hardware producer are pushing back on some aspects of the reporting.

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Originally, it was reported that Sequoia Capital led the round, which had included participation from a number of other investors. In the weeks after the initial report, a number of big-name investors became associated with the round. This was an error, it turns out.

On Tuesday, CoinDesk published the results of its efforts to confirm whether Sequoia Capital or SoftBank—one of tech VC’s most entrenched incumbents and a johnny-come-lately high roller—were among the firms involved in the funding round.

Here are CoinDesk’s findings in summary:

  • SoftBank and Tencent flatly deny participating in the round.
  • China International Capital Corporation (CICC) is another investor that some outlets reported investing in the round, eventually offered “no comment on the issue,” after declining to explicitly deny its involvement.
  • CoinDesk cited a blog post, written under a pseudonym on QQ News, as an initial source of the misinformation.

It appears as though SoftBank and Tencent’s involvement in the round was added to the narrative in the months after Crunchbase News, China Money Network, and CCN initially reported on the investment round in June.

At this time, Crunchbase News has not found inaccuracies in its initial reporting. But some publications did end up reporting false information as it was surfaced on Chinese social media.

How False Investment News Is Born

As far as CoinDesk could gather, the initial QQ post mentioning Sequoia and Tencent, as well as the Abu Dhabi Investment Authority and the Canadian Pension Fund, was published on July 23rd.

Crunchbase News found another post falsely reporting investor involvement, published on August 4th on QQ News, which was picked up by CoinTelegraph on August 7th. In turn, a TechCrunch contributor cited the CoinTelegraph article in an article profiling Bitmain and its business.

At time of writing, neither the Abu Dhabi Investment Authority or the Canadian Pension Fund have confirmed or denied their investment in the round. The claims made in the initial QQ post from late July remain unsubstantiated.

How And Why The Bitmain Story Spread

In the cryptocurrency ecosystem in particular, where price is less a reflection of real value than easily-spooked animal spirits, a relationship (real or perceived) with legitimate institutions outside crypto-land is incredibly… Click To Tweet

One of the challenges of reporting on funding events involving private companies is, well, the privacy.

Because privately-held companies (and a good portion of their investors) only have scant legal disclosure requirements, it’s sometimes difficult to independently confirm the terms of– and participants in a transaction.

Add any additional friction—an ocean’s worth of distance, a language barrier, and a limited press, for instance—and it’s understandable why English-language tech and VC news concerning Asian startups is occasionally unreliable.

Factor in the excitement (irrational exuberance, even) around blockchain technology, a rather secretive mysterious company at its center, and the mystique of big-pocketed investors and you’ve got a perfect storm on your hands.

In the cryptocurrency ecosystem in particular, where price is less a reflection of real value than easily-spooked animal spirits, a relationship (real or perceived) with legitimate institutions outside crypto-land is incredibly valuable.

This is a case study of why it’s important for reporters and readers alike to “trust, but verify.”