Written by: Glendon, Techub News
As the heat of the DAT market fades, the predicament faced by BNB Treasury Company seems more severe compared to other cryptocurrency treasury companies.
Last night, YZi Labs issued a formal notice and correction request to BNB Treasury Company CEA Industries (NASDAQ: BNC) asset manager 10X Capital Asset Management LLC. As a significant shareholder of CEA Industries, YZi Labs accused 10X Capital of two main issues: first, mismanagement of CEA Industries' assets and a lack of necessary transparency; second, an intention to violate the strategic service agreement previously signed with YZi Labs.
The core dispute between the two parties centers on 10X Capital's threat to force BNC to abandon its original BNB asset management strategy in favor of investing in other cryptocurrencies like Solana. This approach deviates significantly from the strategic direction articulated by 10X Capital during the private equity financing (PIPE) in July. In light of this, YZi Labs demanded that 10X Capital confirm in writing by December 5 that it would strictly adhere to the BNB asset management strategy promised to PIPE investors and that it had not improperly disposed of BNB assets.
From the sensational "honeymoon" months ago to the current "breakup" tension, how did 10X Capital and YZi Labs drift apart, and how did their dispute evolve step by step to this point?
The "Honeymoon Period" in the DAT Wave
This summer, the digital asset treasury (DAT) wave surged. On June 24, Nasdaq-listed crypto mining chip manufacturer Nano Labs announced it would issue $500 million in convertible notes to build a BNB strategic reserve, opening the door to the BNB treasury sector. On July 16, Nasdaq-listed biotechnology company Windtree Therapeutics (NASDAQ: WINT) followed suit, announcing a $200 million securities financing specifically for building a BNB treasury. A week later, Windtree Therapeutics further strengthened its BNB cryptocurrency funding strategy by signing a financing agreement worth up to $520 million. The strategic shifts of these two U.S. listed companies, combined with BNB briefly becoming the fourth largest cryptocurrency by market capitalization, attracted considerable institutional attention, prompting several DAT companies centered on BNB to accelerate their initiatives and layouts.
Meanwhile, Binance was selecting suitable candidates to become the "orthodox army" of the BNB treasury. After careful screening, Binance ultimately focused on CEA Industries, which primarily sold e-cigarettes and had a market capitalization of less than $8 million (originally NASDAQ code: VAPE).
On July 28, a significant private financing round led by 10X Capital and YZi Labs was successfully completed. CEA Industries raised $500 million through this financing to establish a BNB treasury. The issuance included common stock PIPE, with total proceeds reaching $500 million, comprising $400 million in cash and $100 million in cryptocurrency, and potentially up to $750 million in additional cash through warrants (assuming 100% warrant exercise). This financing featured a strong lineup, with many well-known institutions such as Pantera Capital, Arche Capital, GSR, Borderless, Arrington Capital, Blockchain.com, Hypersphere Capital, and Kenetic also participating.
In terms of roles, 10X Capital was responsible for asset management, while YZi Labs participated as a significant shareholder, providing ecological resource support. The two parties signed a strategic service agreement, clearly stating the goal of building a digital asset treasury centered on BNB, transforming CEA Industries from an e-cigarette seller into a publicly listed company in the crypto space, and creating the world's largest publicly listed BNB treasury company.
At that time, the DAT market was in a prosperous golden period, and the overall crypto market also showed a strong upward trend, with BNB's rise being particularly noteworthy. Following the PIPE financing announcement, CEA Industries' stock price surged from $8.88 before the announcement to $57.59, an increase of nearly 550%. In the following period, YZi Labs, 10X Capital, and CEA Industries worked together, enjoying a brief "honeymoon period."
On August 6, CEA Industries officially completed a $500 million private placement led by YZi Labs. At the same time, it changed its stock code on the Nasdaq from "VAPE" to "BNC" and planned to operate its new BNB funding strategy under the name "BNB Network Company." As of October 21, publicly available data showed that CEA Industries held 500,000 BNB, with a total investment of $435 million, making it the largest BNB treasury company in terms of capital scale in the market.
During these two months, BNB's price soared to new highs, eventually breaking through $1300. David Namdar, a former senior executive at 10X Capital and now CEO of CEA Industries, once praised BNB as "the most overlooked blue chip in the market." He stated that BNB's breakthrough of $1300 was not an "accidental result or rare peak," but rather demonstrated the network's credibility, scale, and practicality, reflecting that its long-underestimated fundamentals had finally broken through.
However, the market is unpredictable. After the "10.11" flash crash, although BNB climbed to $1375 in mid-October, the overall situation in the crypto market took a sharp downturn, entering a downward channel, and BNB's price subsequently fell. Meanwhile, liquidity contraction led to a significant decrease in institutional investors' risk appetite, further exacerbating the "tide retreat" phenomenon in the DAT market. Perhaps influenced by this, CEA Industries' pace of increasing holdings noticeably slowed. According to the company's publicly available holding data, from the end of October to now, the company has only increased its holdings by about 15,000 BNB over the past month, bringing its total holdings to approximately 515,000 BNB. Additionally, its holding's floating profit has drastically shrunk from nearly 50% to about 7% currently.
It is evident that CEA Industries' development trajectory and actual performance after completing the financing did not align with YZi Labs' expected blueprint. Thus, while YZi Labs was "defending its rights," it also conceived the idea of "seizing control."
10X Capital's Governance Failure, YZi Labs Seeks Control
In fact, before YZi Labs publicly accused 10X Capital of "breach of trust" and mismanagement yesterday, it had already submitted a preliminary consent statement to the U.S. Securities and Exchange Commission (SEC) on November 27, clearly aiming to seek written consent from shareholders to expand the board of directors of CEA Industries and elect new directors.
YZi Labs stated that its initial investment in CEA Industries was based on the latter's solid fundamentals and BNB-centered digital asset management strategy. Despite the significant rise in the price of BNC's main asset BNB, the actual performance of BNC has been contrary to the expected investment logic, resulting in continuous damage to shareholder value. At the same time, YZi Labs pointed out that BNC has serious delays in submitting key documents to the SEC, lacking updates for investors on its digital asset reserves and net asset value (NAV), leading to confusion among investors regarding the company's identity, information dissemination, and strategic direction.
Ella Zhang, head of YZi Labs, pointed out that BNC's poor performance is the result of multiple factors, with ineffective strategic execution, insufficient investor communication, and lack of effective oversight being direct causes. She emphasized, "We are selecting experienced and capable directors to address the company's poor stock performance and operational shortcomings and help unlock the value that should belong to shareholders."
Based on this statement, if the majority of BNC's shareholders agree to the above proposal, YZi Labs will effectively take control of the world's largest BNB treasury company.
It is noteworthy that at this time, YZi Labs' statement submitted to the SEC did not directly mention 10X Capital and its breach of fiduciary duty. However, just a few days later, news emerged in the market that 10X Capital was attempting to force BNC to abandon the BNB asset management strategy in favor of investing in cryptocurrencies like Solana, sparking industry discussions. Whether YZi Labs' public statement triggered 10X Capital's strategic adjustment or if the latter had already harbored intentions to shift to competitors remains unknown.
Thus, in yesterday's announcement, YZi Labs no longer held back, directly targeting 10X Capital and stating that it exhibited systematic dereliction of duty.
YZi Labs first reiterated that 10X Capital has caused several serious issues, including the failure to timely disclose key asset data of BNC, which has prevented shareholders from assessing investment risks and led to a significant reduction in investment value. Secondly, YZi Labs accused BNC CEO David Namdar and 10X Capital founder and BNC board member Hans Thomas of severely violating their fiduciary duties, specifically by failing to fulfill the BNB ecosystem investment commitments outlined in the strategic agreement and refusing to amend the unreasonable terms of the AMA (Asset Management Agreement) between BNC and 10X.
Overall, these improper actions have directly led to a sharp decline in BNC's stock price. As of the time YZi Labs issued its announcement, BNC's stock price had dropped 19% from the PIPE announcement price of $8.88 per share, and the decline from its peak of $57.59 was as high as 87%, significantly underperforming its peers.
The report warns that if 10X Capital continues to delay information disclosure and exacerbates conflicts of interest, leading to a worsening of mismanagement, shareholders will face the risk of continued stock price decline.
Delving into the deeper reasons behind the intensifying contradictions between the two parties, it is the result of the intertwined pressures of market conditions and strategic differences. The mismanagement by 10X Capital and BNC is undoubtedly the main trigger for this dispute, which is also closely related to the recent market situation. The retreat of the DAT market is evident, and market confidence has been severely impacted, with BNB's price dropping from the October high of $1375 to the current $910, a decline of over 53%, further reducing institutional investment willingness.
Moreover, 10X Capital's shift may hide multiple motives. On one hand, it could be a "threat" tactic in response to YZi Labs' desire to add new directors, aimed at maintaining its interests and position; on the other hand, this shift also reveals 10X Capital's lack of confidence in the BNB ecosystem, indicating that it does not genuinely believe in the latter's long-term development. Thus, it attempts to achieve short-term gains by adjusting its investment portfolio (such as reducing BNB holdings), while YZi Labs, as a major shareholder, is more focused on long-term ecological synergy. This clash between short-term interests and long-term strategies becomes particularly sharp amid increasing volatility in the crypto industry.
With the situation having developed to this point, YZi Labs' public accusations have thoroughly brought the contradictions to the forefront. If 10X Capital cannot provide a commitment to rectify the situation by December 5, this "rights protection" and "control seizure" battle may evolve into a milestone event in crypto custody governance. How this matter will develop remains to be seen. However, we can speculate on what might happen if YZi Labs were to gain complete control of BNC.
It is essential to clarify that the current BNB DAT market is facing a severe situation of depleted capital inflows, with some major BNB treasury companies being very cautious in increasing their BNB holdings, with almost no actions taken. For example, since Nano Labs disclosed its holding of over 128,000 BNB in mid-August, it has not publicly released any information about increasing its holdings; Windtree Therapeutics has faced delisting from Nasdaq due to regulatory issues and a plummeting market value, and similarly has no recent news of increasing holdings; BNB treasury company BNB Plus (stock code: BNBX) disclosed in mid-November that its BNB holdings reached 15,524.68 BNB, but its scale is relatively small compared to the market.
In this challenging market context, YZi Labs is likely to leverage its strong capabilities and influence, along with the advantages of Binance and the BNB ecosystem, to re-energize capital inflows and form a new ecological system of "Binance ecosystem + treasury company." Additionally, it can quickly integrate rich resources such as BNB staking and Launchpad ecological projects, attracting institutional funds through a "treasury + ecosystem" linkage model. Furthermore, YZi Labs' insistence on making BNC's holding data public to enhance market transparency can also help rebuild institutional trust in the BNB treasury.
However, it is worth mentioning that the market sentiment recovery cycle needs to be considered. At this stage, the cautious mindset of institutions due to the DAT market retreat may take several quarters to reverse. Meanwhile, the "deep-pocketed" YZi Labs can convey confidence in long-term holding to the market through continuous actual increase actions, gradually rebuilding market trust. But this process hinges on 10X Capital acknowledging its violations of agreements and fiduciary duties and improving BNC's operational mechanisms.
Finally, how this battle for control of the largest BNB treasury company will develop remains to be observed by the industry. Regardless of the outcome, it is expected to bring a better development result for the relatively lukewarm BNC. At the same time, this incident also exposes some issues in the crypto custody field: in the absence of a unified regulatory framework, the boundaries of power for asset managers, shareholder rights protection mechanisms, and information disclosure standards all have ambiguous areas. If 10X Capital's violations are not effectively constrained, it may trigger a chain reaction, leading other institutional investors to follow suit, further undermining market trust in crypto treasury companies. From this perspective, the outcome of this game will not only determine the victory or defeat of the two companies but also serve as a critical test of the governance mechanisms in the crypto custody field.
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