What To Know:
- YZi Labs has launched a proxy fight against BNC’s board, accusing directors of restricting shareholder rights through a poison pill and governance changes.
- The dispute centers on claims that BNC is drifting away from its BNB-focused strategy and failing to uphold transparency and fiduciary duties.
- YZi also raised concerns over potential conflicts of interest involving management and ties to competing digital asset projects.
YZi Labs Management Ltd. has escalated its dispute with the board of BNB Network Company, formerly known as CEA Industries, accusing directors of undermining shareholder rights, blocking reform efforts, and steering the company into what it describes as strategic drift. The confrontation reflects a sharp rift between one of BNC’s largest shareholders and the company’s leadership,which came in just months after a high-profile private investment round.
YZi Labs vs BNC Board
YZi Labs in a statement issued this week said it is reviewing recent governance actions by BNC, and has commenced a proxy solicitation process. The move comes after the board adopted a shareholder rights plan, commonly referred to as a poison pill, along with changes to the company’s articles of incorporation. According to YZi, such changes make it more difficult for shareholders to exercise written consent and go beyond what is required under Nevada corporate law.
YZi says the real, tangible impact of these actions is to delay shareholder actions, or to discourage them, at a time when investor confidence in the company’s direction is already flagging. The company said the board proceeded despite warnings that new restrictions would add to discontent and increase legal exposure as they related to fiduciary responsibilities. The board did appear to do it in a bid to entrench the group leadership, rather than address the increasing questions about how the company manages itself and strategy, YZi said.
The shareholder group argued that directors have chosen to limit shareholder rights, not confronting mistakes or correcting criticisms. YZi said a number of other investors have privately raised similar concerns about the situation, and in particular, they were worried about what they called BNC’s abrupt break with the BNB ecosystem.
An argument revolved around BNC’s strategy and reserves for use of digital assets. YZi rebutted the firm’s public position that it never considered alternatives to BNB or a rival in the form of a digital asset reserve business.
The company cited quotes from BNC chief executive David Namdar at an industry conference in November 2023 that the company was considering other cryptocurrencies like Solana. Namdar and board member Hans Thomas also raised concerns for YZi about their involvement in promoting and fundraising to support other digital asset reserve projects outside of BNC in their time at BNC. Conversely, these actions have raised questions about conflicts of interests and the extent to which management’s needs and interests remain consistent with those of investors, the shareholder group said.
The conflict has unfolded against the backdrop of a broader governance battle at BNC, which trades on Nasdaq under the ticker “BNC.” YZi Labs, the family office of Binance founder Changpeng Zhao, issued formal demands to 10X Capital, the firm managing BNC’s digital asset treasury. The demands accuse 10X Capital of mismanagement, actions that harmed shareholder value, and breaches of contractual obligations.
The dispute is striking given the timing. Only months earlier, BNC completed a $500 million private investment round that included YZi Labs and 10X Capital. At the time, investors were pitched a clear thesis centered on building a public company treasury focused on BNB accumulation.
YZi now alleges that this core strategy has been quietly sidelined. According to the firm, BNC’s management communicated plans to move away from the BNB ecosystem in favor of other digital assets, a shift YZi says undermines the rationale that drew investors into the deal.
The shareholder group also claims that recent decisions by 10X Capital and BNC leadership have weighed on the company’s stock performance. YZi alleges that several members of the management team, many of whom were appointed following 10X Capital’s involvement, failed to provide timely or complete disclosures, contributing to shareholder losses.
Transparency remains a key point of contention. YZi said information on BNC’s BNB holdings, share count, and net asset value has been delayed, while the company lacks a public treasury dashboard. Such disclosures are widely viewed as standard among digital asset treasury firms, particularly those seeking to maintain market trust.
YZi further accused senior figures of breaching fiduciary duties by refusing to amend what it described as unfavorable advisory terms with 10X Capital and by backing competing ventures. The firm said these actions, taken together, represent a breakdown in governance at a company that was marketed as a straightforward proxy for long-term exposure to the BNB ecosystem.
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