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RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2023

20.	RELATED PARTY TRANSACTIONS

Compensation for key management and Board of Directors

	Years ended December 31,
In thousands of USD	2023		2022		2021
Salaries and other emoluments		8,986		11,969		11,627
Total		8,986		11,969		11,627

Balances and transactions with Bitmain and BTC

During the Carve-out Period, the Group and BTC were integrated into the group-wide operation directed by Bitmain before the completion of the Reorganization.

Bitmain’s business model includes a combination of stand-alone and combined business functions between Bitmain, BTC and the Group, varying by service line and country. The consolidated financial statements of the Group include allocations of certain costs between Bitmain, BTC and the Group. Such allocations are estimates, and also may not represent the cost of such services if performed on a stand-alone basis. See further description of cost allocations in Note 2.

The invested capital in the consolidated statements of financial position represents Bitmain’s historical investment in the Group, the net effect of allocations from transactions with Bitmain and BTC, and the Group’s accumulated retained earnings.

Upon completion of the Reorganization, the Group started operating on a stand-alone basis and Bitmain and BTC no longer hold equity interest, exercise significant influence over, or act as an affiliate of the Group and its operations. As a result, Bitmain and BTC ceased to be related parties to the Group.

The activities between the Group and Bitmain and BTC before the completion date of the Reorganization were presented as related party transactions in the consolidated statements of operations and comprehensive income / (loss), cash flows and changes in invested capital and equity.

A reconciliation of deemed distribution to related parties to the corresponding amounts presented in the consolidated statement of cash flows for all periods presented is as follows:

	Years ended December 31,
In thousands of USD	2023		2022		2021
Deemed distribution to related parties per consolidated statements of changes in invested capital and equity		-		-		(29,311	)
Corporate allocations		-		-		(2,167	)
Net effect of attribution of the assets and liabilities from Bitmain’s business transferred to the Group during the Reorganization		-		-		20,535
Total deemed distribution to related parties per consolidated statements of cash flows		-		-		(10,943	)

Balances and transactions with Bitmain and BTC

As of December 31, 2023 and 2022, balances with Bitmain and BTC are nil.

Transactions with Bitmain and BTC before the completion date of the Reorganization were disclosed as below:

	Years ended December 31,
In thousands of USD	2023		2022		2021
Revenue from Bitmain and BTC ⁽¹⁾		-		-		73,522

(1)	Revenue from Bitmain and BTC arise from the Group’s normal course of business, See Note 2.

Other related party balances and transactions

The following set forth other significant related party and the relationship with the Group:

Name of related party		Relationship with the Group
Matrix Finance and Technologies Holding Group and its subsidiaries (“Matrixport Group”)		The Group’s controlling person is the co-founder and chairman of the board of directors of Matrixport Group and has significant influence over Matrixport Group.

Details of assets and liabilities with the related party are as follows:

	At December 31,
In thousands of USD	2023		2022
Due from a related party
- Trade receivables		187		75
- Loans to a related party ⁽¹⁾		-		322
Total due from a related party		187		397

Due to a related party
- Other payables⁽²⁾		33		316
Total due to a related party		33		316

(1)	Loans to a related party represent unsecured, interest-free loans made to the related party. These loans are due on demand.

(2)	Other payables represent the accrued service expense related to the custody and other services provided by the related party.

Details of transactions with the related party are as follows:

	Years ended December 31,
In thousands of USD	2023		2022			2021
- Provide service to a related party		754		3,076			530
- Receive service from a related party		228		425			294
- Interest earned from a related party		-		1,499			1,552
- Return of wealth management products from a related party		-		283			737
- Loss on disposal of subsidiaries to a related party		74		-			-
- Changes in fair value of financial assets at fair value through profit or loss		3,527		(952	)		-

During the years ended December 31, 2023, 2022 and 2021, substantially all of the Group’s cryptocurrencies were held in custody by Matrixport Group, and the Group’s disposal of cryptocurrencies, at spot price on the date of disposal, was primarily to Matrixport Group.

In February 2021, the Group signed a loan agreement with Matrixport Group, pursuant to which the Group agreed to grant a revolving line of credit with a maximum amount of US$20 million charged with an annual interest of 12.5% by the Group, each tranche of credit utilized shall be repaid within 60 days. The credit line has expired, and the loan has been fully repaid in June 2021. The Group received an interest of approximately US$0.8 million associated with the loan.

In July 2022, the Group signed an agreement with Matrixport Group, which is the general partner of a limited partnership set up by the Matrixport Group, to subscribe a limited partner interest in the limited partnership and the capital commitment is amounting to US$ 20 million. The Group, as a limited partner, does not have control or significant influence over the limited partnership. As of December 31, 2022, the capital contribution made by the Group to the limited partnership is US$17 million. The Group recorded approximately US$3.5 million gain and US$952,000 loss on change in fair value of financial assets at fair value through profit or loss for the years ended December 31, 2023 and 2022, respectively.

During the years ended December 31, 2022 and 2021, the Group made non-secured lending to, and purchased non-principal guaranteed wealth management products from Matrixport Group in cryptocurrencies. The Group did not incur such transactions during the year ended December 31, 2023. The summary of transactions is as follows:

	Type of cryptocurrency	Amount in thousands of cryptocurrencies	Date of purchase / lending	Date of redemption / collection	Effective annual yield of return / interest rate
Loan	USDC	30,000	September 8, 2021	December 27, 2021	8.25	%
Wealth management product - type A	USDT	30,000	October 20, 2021	December 28, 2021	13.00	%
Wealth management product - type A	USDT	80,000	January 14, 2022	March 27, 2022	1.00	%
Loan	USDT	15,000	April 1, 2022	June 28, 2022	5.83	%
Loan	USDC	5,000	April 1, 2022	June 28, 2022	7.00	%
Wealth management product - type A	USDT	10,000	April 15, 2022	June 17, 2022	3.06	%
Loan	USDC	30,000	May 12, 2022	May 19, 2022	15.00	%
Wealth management product - type B	USDT	10,000	June 17, 2022	June 28, 2022	5.70	%
Wealth management product - type B	USDT	50,000	June 20, 2022	June 28, 2022	5.92	%
Loan	USDC	80,000	July 1, 2022	September 28, 2022	4.13	%
Loan	USDC	20,000	October 11, 2022	December 28, 2022	3.50	%

The Group purchased two types of wealth management products during the years ended December 31, 2022. Wealth management product type A represents the Group’s units of interest in the underlying cryptocurrency trading account and the value of the units is based on the performance of the trading account. The Group has the right to redeem the units with Matrixport Group based on the value on the redemption date during certain days of each month. See Note 2(h) regarding the accounting policy for cryptocurrency-denoted wealth management products.

Wealth management product type B represents the Group’s variable-interest cryptocurrency deposit at Matrixport Group. The deposit is not protected by any deposit insurance scheme and non-secured, and the Group may lose some or all of the amount deposited in extreme market conditions. Upon withdrawal, the Group receives the same type of cryptocurrency in the same quantity in principle plus additional interest returns. The deposit can be withdrawn on demand and is generally delivered to the Group within 72 hours. The nature of the wealth management product type B is, in essence, a cryptocurrency lending arrangement. See Note 2(h) regarding the accounting policy for cryptocurrency lending arrangements.

As of December 31, 2022 and 2021, corresponding to the above transactions, the balances of receivables settled in cryptocurrencies and embedded derivative were both nil. The change in fair value of the cryptocurrencies lent or invested, and the embedded derivative relating to the wealth management product type A are immaterial as the arrangements are short term in nature and the quoted prices of USDT and USDC are relatively stable.

To facilitate the lending and wealth management products purchases, the Group purchased the aforementioned cryptocurrencies using approximately US$286 million and nil the years ended December 31, 2022 and 2021, respectively. The total receipts from the collection of lending and redemption of wealth management products were disposed of by the Group for approximately US$302 million and US$61 million during the years ended December 31, 2022 and 2021, respectively.