Crypto Mining Rig Maker Canaan Added to SEC List of Scrutinized China Companies

Chinese crypto mining rig maker Canaan (CAN) on Thursday morning disclosed it has come under the gaze of the U.S. Securities and Exchange Commission (SEC) for its ties to Beijing.

• At issue, according to the SEC, is Canaan's use of an auditor for its 2021 annual report that the U.S. Public Company Accounting Oversight Board (PCAOB) could not fully inspect or investigate, said the company in a filing. Said auditor was KPMG Huazhen LLP.
• Finalized in 2021, the Holding Foreign Companies Accountable Act (HFCAA) was aimed at removing from U.S. public markets those companies controlled by foreign governments.
• Canaan has until May 25 to file documentation with the SEC to prove that it is not "owned or controlled" by a foreign government, according to the HFCAA. If Canaan were to remain as an "identified" issuer for three consecutive years, it risks being delisted from U.S. markets, including over-the-counter trading.
• "The Company will continue to comply with applicable laws and regulations in both China and the U.S., and strive to maintain its listing status on Nasdaq," Canaan's Thursday filing said.
• The SEC and Canaan could not be reached for comment at the time of publication.
• Canaan is one of over 70 companies so-identified yesterday, with other names including electric vehicle makers XPeng and Nio, e-commerce giants JD.com and Trip.com, and the maker of one of China's covid vaccines, Sinovac Biotech.
• Alongside a more than 3% plunge in the broader stock market and bitcoin (BTC) on Thursday, China-linked crypto mining-related stocks are also headed sharply lower, with Canaan (CAN), Ebang (EBON), Bit Digital (BTBT), and Bit Mining (BTCM) all off 6%-10%.
• Bitdeer and BitFuFu are two China-born mining companies that are looking to go public via SPAC deals with Blue Safari Corporation (BSGA) and Arisz Acquisition Corp. (ARIZ), respectively.
• In 2015, KPMG Huazhen and another three Chinese branches of global accounting firms settled a case brought against them by the SEC for failing to produce documents related to fraud investigations. The firms paid $500,00 each and admitted that they didn't produced the required documents.