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Short seller Iceberg targets Diginex’s Equos

Short seller Iceberg Research issues a report saying Diginex is burning cash at an unsustainable rate.



Crypto financial player Diginex, operator of Nasdaq-listed exchange Equos, with a market cap of $345 million, has come under the fire of a secretive short seller, Iceberg Research.

Iceberg, whose research exposed financial problems at Noble Group and other commodities groups but which does not disclose its principals, says Diginex is burning cash at an unsustainable rate.

DigFin labeled Diginex the “everything bank” based on its launching multiple product lines, from funds of funds to prime brokerage to the Equos crypto venue. The firm had told DigFin it expected to do well in the institutional market because Equos was the first crypto exchange listed on Nasdaq.

But Iceberg reports that all of these businesses generated a mere $23,100 for the first half of 2021 (end September). And this figure was down from $180,000 a year before.

Given the past year’s rise of prices for Bitcoin and other cryptocurrencies – the market cap for all cryptocurrency has topped $2 trillion – and last week’s direct IPO of U.S. exchange Coinbase, Iceberg says Diginex has fallen short of analyst expectations.

Equos only went live in July, 2020 (one quarter before the company’s revenue report) although Diginex as a business has been around since 2016. Equos is the largest part of Diginex’s operation.

Diginex’s spokesman said: “The report from a short-selling firm makes claims that lack context and are framed to mislead investors in order ot drive the stock price downwards.

“Diginex remains focused on the company’s strategy to create long-term sustainable growth, and generate value for shareholders. We are extremely proud of the performance of our crypto exchange Equos, which launched less than 12 months ago, and volumes are growing rapidly.”

Equos aims to serve institutional investors, so comparing it to unregulated exchanges such as Binance may be unfair. But as of April 14, Equos reported $31.5 million in 30-day average volume, versus $2.9 billion for Coinbase, which has a similar target clientele. (Binance notched $52.2 billion in average turnover.)

Most recently, Equos reported over $1 billion in turnover for the month of April.

Diginex has told DigFin its most direct competitor is CME, for the crypto derivatives business serving licensed institutions. Iceberg didn’t compare its business to CME, but according to, on April 18, CME recorded volumes in BTC:USD futures of about $2.5 billion. This ranked it 8th in the world; Equos didn’t appear on this ranking.

While Coinbase generated $1.4 billion in revenues in 2020 (from a launch dating back to 2012), Diginex only managed a little over $23,000, including trading fees, Iceberg reported.

Iceberg says this is unsustainable because Diginex is spending money as if it were a far more successful business. Excluding director compensation, each Diginex head was paid an average of about $159,000 salary and share options in the first half of 2021; the average director was paid $1.4 million, Iceberg reports, although this figure represents a mean and may not be indicative of how the majority of directors are compensated.

The firm’s office at IFC Two in Central, Hong Kong is paying $187,000 a month in rent.

Iceberg’s report, issued on April 15, also alleges a number of corporate-governance red flags.

The Nasdaq listing has given Diginex runway on the shoulders of American retail investors. Diginex achieved a back-door listing via a merger with a Singapore-based SPAC, 8i Holdings, in September 2020. Iceberg reports that as of November 4, 2020, 8i held 4.34 percent of Digitnex’s outstanding shares, but no longer held any shares as of 28 January, 2021.

Miles Pelham, Diginex’s founder and former executive chairman, through his personal investment vehicle, Hong Kong-incorporated Pelham Limited, has reduced his stake to below 1 percent of Diginex, according to the February 9, 2021 prospectus of Diginex Limited.

Pelham’s LinkedIn page now has him based in London where he is founder and chairman of Diginex Solutions, an ESG data infrastructure company.

Despite having achieved a listing on Nasdaq ahead of Coinbase, Diginex’s Equos is ranked near the bottom of the world’s crypto exchanges in terms of turnover. These rankings are not clear-cut, as they may involve factors such as API connections, numbers of tokens listed, and other factors that will favor established crypto venues over new ones. Nonetheless, Equos is competing against both a raft of other small players and versus the big fish.

Iceberg says Diginex’s corporate-governance record and its managerial decisions suggest it is unlikely to win the institutional business it is pursuing.

“All that underlies its inexplicable market cap of $345m are a powerpoint deck and a struggling marketplace,” Iceberg Research wrote.

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