A fierce governance battle has broken out at CEA Industries, the largest publicly traded BNB financial company in the United States. CEA Industries, which currently operates as BNB Network Company (BNC) under the Nasdaq ticker “BNC,” comes after major shareholder YZi Labs filed a formal demand with asset manager 10X Capital for what it calls mismanagement and possible abandonment of the company’s core investment strategy.
Announced by YZi Labs Just months after the two companies partnered on a $500 million private investment in the company, the company announced it had served notice on 10X Capital, citing mismanagement, value-destroying conduct and threats of breach of contract.
The deterioration in relations between the two companies has escalated into a proxy fight, with YZi Labs seeking to revamp its board of directors through a consent process filed with the Securities and Exchange Commission (SEC).
YZi Labs accuses 10X Capital of mismanagement
The dispute centers on allegations that 10X Capital, which manages BNC’s digital asset treasury, plans to pivot away from accumulating BNB tokens, despite representations made to investors during a summer funding round.
YZi Labs, the family office of Binance founder Changpeng “CZ” Chao, claims that the company’s management has notified market participants of its plans to abandon the BNB ecosystem and switch to alternative cryptocurrencies such as Solana, contradicting the investment thesis that attracted its backers.
YZi Labs also claims that 10X Capital’s recent moves in collaboration with BNC’s current CEO have negatively impacted the company’s stock, adding that most of BNC’s management team was appointed by 10X, which through various actions has misled shareholders and significantly undermined shareholder value.
According to the family office, 10x has been “delayed in disclosing basic information about BNC’s assets, including BNB’s holdings, number of shares, mNAV, and lack of a public dashboard that provides market-standard financial transparency similar to other DAT leaders.”
It also alleged a breach of fiduciary duty by David Namdar and Hans Thomas due to their “conflict of interest in refusing to amend BNC’s unconscionable AMA terms to 10X and the promotion of a competing Digital Asset Treasury (“DAT”) business, including the use of company resources to do so.”
YZi Labs said in a press release that the combined impact of both accused parties has “significantly underperformed BNC stock relative to its peers, trading approximately 19% below its pre-PIPE announcement level and 87% below its post-announcement level.”
In contrast, BitMine Immersion Technologies Inc. fared much better, “up 667% from its pre-announcement closing price, and was mostly flat after the announcement, down just 2%,” the company noted.
Proxy war intensifies
YZi Labs submitted a preliminary report Consent Statement with SEC The company is seeking shareholder support to expand its board of directors and elect additional directors, which would allow shareholders to vote by written consent without a formal meeting. The company directly owns approximately 2.15 million shares and also holds stock acquisition rights.
The company requests that “10X and its select directors and CEO amend the BNC AMA to make available to BNC stockholders the basic information expected of a publicly traded DAT, including operating plans, asset management methodologies, risk frameworks, reporting packages, personnel summaries, and evidence of systems, controls, and infrastructure.”
It also added that BNC shareholders should be provided with timely updates reflecting “the value of BNB acquisitions and holdings, the number of BNC shares outstanding, and other material and market-standard information customarily disclosed by other DATs.”
The notice from YZi Labs also asked 10X to confirm in writing by Dec. 5 that it is following the BNB financial strategy it has expressed to investors and that it has not “improperly disposed of any BNB assets.”
