I received a email.
URGENT
STRICTLY CONFIDENTIAL
FOR ADDRESSEE ONLY
Dear CipherMine 'bondholder',
We write to you in your capacity as an owner of a 'bond' issued by CipherMine ('CM'). This is an important communication sent to you by Wood Technology LLP ('WT'). Kate Craig-Wood has at all times acted through WT. WT is also the legal owner of the mining hardware referred to below.
You may wish to take legal advice on this communication and its implications for you.
The Purpose of this Communication
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The purpose of this communication is: (1) to inform you that CM is unable to meet its liability under the CM B1'bond' issued last year (the 'Bond'); and (2) to propose a restructure plan which offers you, on a pro rata basis, the assets left at CM's disposal.
CM's assets and liabilities
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CM's assets (the 'Assets') consist of:
1. The existing mining hardware, which includes hardware purchased with the proceeds of the 'Bond'. It is estimated to have a residual resale value of approximately EUR 10,000;
2. A 'share' in the start-up crowdfunding platform CipherTrade ('CT Share') based on a contribution at the relevant time by CM of USD $20,000; and
3. Any remaining cryptocurrency mined. At the date of this communication, this is estimated to have a value of approximately EUR 7,500.
CM's principal liability consists of the 'Bond', which has a total redemption value of approximately EUR 360,000. The maturity date of the 'Bond' was 9 September 2014, and CM is unable to meet that liability.
CM's failure
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CM's failure is the result of an exponential increase in mining difficultly. The situation was further aggravated by the fact that the value of BTC has increased six-fold over the last year or so, and by HashFast LLC, a major supplier of hardware to CM, going out of business.
The Contract
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CM's failure is unfortunate, although from the start it was a possibility and was provided for in various sections of the Contract and Prospectus (the 'Contract'). The Contract set out the terms between the contracting parties and was accepted by you.
The Contract contained the following disclaimer in a section marked "Warning" which makes it quite clear that: "[...] we, Kate Craig-Wood, Wood Technology LLP, Giles Russell, and all other individuals and legal entities associated directly or indirectly with this security, are in no way liable for any losses you may incur in connection with CipherBond or CipherMine."
The effect of this term of the Contract is that you accepted that you have no legal recourse against anyone involved in CM or the 'Bond'.
The Contract also provides: "The bonds shall ultimately be secured against the assets purchased with the funds, but this security would only be needed in dire circumstances where CipherMine had completely run out of cash."
As you are aware, mining hardware was purchased with the proceeds of the 'Bond' which could therefore be sold and remaining funds distributed amongst 'bondholders' on a pro rata basis. However, CM's 'shareholders' do not intend to do that.
Instead, they would like to offer you a pro rata share of the Assets in accordance with the restructure plan below which has been approved following a vote of CM's 'shareholders'. Those Assets comprise the proceeds from the sale of all mining hardware (and not just the hardware purchased with the proceeds of the 'Bond'), any remaining cryptocurrency mined, and the CT Share.
The Restructure Plan
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The following restructure plan is proposed:
1. Incorporate a new limited liability company ('New Company');
2. Transfer the CT Share to the New Company;
3. Make shares in the New Company available to 'bondholders' on a pro rata basis;
4. Sell CM's mining assets and make the proceeds of sale available to the 'bondholders' on a pro rata basis, along with any remaining cryptocurrency mined.
Next Steps
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Please indicate whether you agree to the restructure plan by sending an email by midnight (GMT) on Wednesday October 1st 2014, to
legal@ciphermine.com with your full name and the email address you used to register with BTC Trading Corp. (btct.co) quoting the original public withdrawal address given, or CipherTrade and your vote by indicating 'Yes' or 'No' in the subject line.
If a majority of 'bondholders' agree to the restructure plan, then it will be put it into effect. In return, you acknowledge that you have waived any right you might have, or have had, to take any action whatsoever against CM's 'shareholders' and/or any other individual and/or entity, arising out of or in connection with CM and/or the 'Bond'.
Finally, please note that if the restructure plan is agreed, you will need to subscribe for the shares in the New Company and, as part of the Know Your Customer procedure, to identify yourself at the point of subscription.
Yours faithfully,
Wood Technology LLP
