YZi Labs, an investment firm backed by crypto magnate Changpeng Zhao, has launched an activist campaign to seize control of BNB Network, a U.S. public company it previously funded, alleging severe strategic mismanagement and underperformance following the company’s pivot to a cryptocurrency-focused treasury.
The firm filed a preliminary statement with the U.S. Securities and Exchange Commission (SEC) on Monday, seeking to expand the company’s board of directors and appoint its own nominees. This maneuver aims to reverse recent corporate changes and could transfer control to Zhao’s family office without the need for a shareholder meeting.
BNB Network, formerly known as CEA Industries, made a strategic shift in July, moving away from its e-cigarette business to concentrate on accumulating Binance’s native token, BNB, as its primary treasury asset. One month later, YZi Labs led a private funding round that raised $500 million for the company.
The company’s shares, which trade on Nasdaq under the ticker BNC, initially surged by 600% mid-year after the financial play. It has since been promoted as the largest public treasury of the BNB cryptocurrency in the U.S.
However, YZi Labs now argues that the strategic execution has “stumbled.” It accuses management of “basic execution errors,” including slow investor updates, delayed key filings, incomplete investor relations materials, and an “almost total absence of institutional marketing.”
The conflict centers on the company’s treasury, which holds approximately 515,000 BNB tokens. These holdings were valued at about $412 million USD at the time of the report, with an average acquisition cost of $851 per unit.
The company is currently facing pressure from a broader downturn in the cryptocurrency market. BNB’s price has corrected more than 40% from its mid-November high of $1,369 USD, trading at approximately $812 USD at the time of the report.
On Monday, BNC shares dropped almost 9% in early trading, reaching $6.35 USD. This extends the discount compared to its reported net asset value (NAV) of $8.09 USD per share. The company’s shares have recorded a 16.3% loss year-to-date.
Ella Zhang, a director at YZi Labs, stated, “We believe BNC’s poor performance is a direct result of weak strategic execution, inadequate communication with investors, and a lack of effective oversight.”
She added that YZi Labs aims to “expand the size of the board of directors and bring in experienced and competent directors who, in our opinion, can provide stronger oversight and address the company’s problems.”
YZi Labs’ offensive also points to the dominant influence of 10X Capital, which serves as both an asset manager and a majority presence on the board. It also cited alleged cross-promotions by CEO David Namdar in other digital asset treasury ventures while CEA Industries struggled.
YZi Labs, which manages over $10 billion USD in assets globally, was renamed from Binance Labs in January. It has backed more than 300 projects across over 25 countries, focusing its investments on Web3, artificial intelligence, and biotechnology. The firm is backed by Zhao, the co-founder and former CEO of Binance.