Freechat's $80 million financing controversy: The founder mined 55 bitcoins a decade ago and is now restricted from high spending

Text/Meteor, Marco, ChainCatcher

Editor/Marco, ChainCatcher

The news of an $80 million financing did not bring the expected publicity for Freechat, but instead raised doubts among some Web3 practitioners, as Freechat has never disclosed any investors after announcing the completion of two rounds of financing, and there have been no reports of any capital investing in it within the industry.

The "half-hidden" high profile sowed seeds of skepticism in the industry, leading to accusations of "fake financing" on the same day.

ChainCatcher's investigation found that the overseas Web3 social platform Freechat was founded by Jack Long, whose Chinese name is Long Yujing, a native of Sichuan, China, and an early Bitcoin miner. In 2013, the Huaxi Metropolitan Daily reported on Long Yujing's mining experience, stating that he mined 55 Bitcoins in one day, with the price of Bitcoin at that time being around 4,000 RMB per coin.

On January 17, a Freechat representative, when interviewed by ChainCatcher, still did not respond directly to inquiries about investor information. "The financing is mainly equity-based, and tokens are just a part of it; most have bought Freechat's equity," he said, "these are all early-stage investors who have come along."

On January 18, Long Yujing stated in an interview with ChainCatcher that the seed round of Freechat was funded by him and another investor, Lao Li, together, and that the $80 million financing would need to wait for the investors to disclose themselves.

ChainCatcher's investigation revealed that Long Yujing founded Chengdu Tai Rui Technology Co., Ltd. (hereinafter referred to as "Chengdu Tai Rui") in Chengdu in 2017. The company was listed as a "dishonest executor" in June 2021, and Long Yujing has repeatedly been subject to consumption restrictions by the court due to labor arbitration with employees and lawsuits with other companies.

Regarding these debt issues, Long Yujing responded, "Chengdu Tai Rui is currently insolvent and unable to repay its debts."

Who invested the $80 million?

The previously low-profile Freechat became one of the most watched companies in the Web3 industry on January 8 due to the news of its massive investment.

On that day, a well-known Chinese venture capital media outlet published an article stating that the blockchain social platform "Freechat" had recently completed $80 million in financing, achieving a post-investment valuation of $800 million; the investors were not disclosed.

The article mentioned that Freechat was founded in 2022 and completed a $2 million seed round of financing in August 2022.

Coincidentally, the news of Freechat's two rounds of financing was first reported by this media outlet, and neither round disclosed investor information.

The aforementioned report became a source for various industry media and quickly spread throughout the industry.

However, the lack of disclosed investors, combined with the project's previous obscurity in the industry, led to skepticism when it suddenly announced such a large financing amount, with some media questioning whether this was a false message released by the project team.

Freechat's official website states that it is a Web3.0 social application that uses end-to-end encrypted communication to ensure anonymity and privacy security, enabling free communication. The company was established in 2020, headquartered in Los Angeles, USA, and conducted an IEO on a blockchain exchange in 2023.

In its white paper, Freechat stated that its business includes social networking, e-commerce, NFTs, value-added services (such as membership and functional membership), advertising, content, payments, DeFi, gaming, and more.

The mobile application interface of the product is similar to that of Feishu, with added functionalities for Douyin short videos, Xiaohongshu graphics and text, WeChat chatting, and Weibo posting. Users can set up a friend-adding function, and the app supports payment of a custom amount of FCC to add friends; after successful payment, they can chat with the target friend.

FCC is the token issued by Freechat, with a total issuance of 1 billion. On November 3, 2023, Freechat announced on social media the launch of a token burn plan, burning 100 million tokens, reducing the total supply to 900 million.

On December 12, 2023, FCC was listed on the BitMart exchange and began trading. As of January 18, FCC was only listed on this exchange.

On January 19, CoinMarketCap data showed that the FCC price was $0.04, with a 24-hour trading volume of $751, giving it a market capitalization of $36 million at this price.

On social media, some users questioned the financing amount.

On January 8, a user commented on Freechat's official Twitter, stating that with an $80 million financing and a token delivery method, the current fully diluted market value of the tokens is less than $70 million, asking, "Is it convenient to disclose specific investor information?"

Freechat responded to this comment, saying, "It's not convenient; relevant institutions will disclose it themselves at the appropriate time." They also mentioned that there is still 10% equity left, and tokens are just a part of it.

On January 17, a Freechat representative told ChainCatcher that the financing is mainly the company's equity, and tokens are just a part of it, "most have bought Freechat's equity."

The representative refused to disclose specific investor information, stating, "These are early-stage investors who have come along."

On January 18, Long Yujing also refused to disclose detailed information about the investors in an interview with ChainCatcher, clearly stating that he could not disclose it, "institutions will disclose it themselves."

As of the time of publication, no institution has announced participation in Freechat's financing.

Long Yujing also revealed that the $2 million seed round financing for Freechat was mainly funded by him and another investor, Lao Li, with each contributing $1 million.

Founder restricted from high consumption, company equity frozen

ChainCatcher's investigation revealed that in 2017, Long Yujing founded Chengdu Tai Rui. According to Tianyancha, the company primarily engages in software and information technology services, with a registered capital of 1.25 million RMB. The company completed a seed round in 2017, with a transaction amount of 1 million RMB, and the investor was Shenzhen Chuangyuan Mofang Investment Enterprise (Limited Partnership), which was established in 2015 with a registered capital of 6.1 million RMB.

Chengdu Tai Rui's main product is the QAQGame game accelerator, which addresses issues such as lag, disconnection, and high latency in online games.

Long Yujing stated that QAQGame was a game accelerator, game props, and traffic business, and previously had high revenue, reaching tens of millions a year, but was shut down due to policy reasons.

Since 2020, Chengdu Tai Rui has been embroiled in a series of troubles.

On June 31 and July 15, 2020, due to failing to fulfill two effective legal documents regarding labor arbitration, Long Yujing was issued a consumption restriction order by the People's Court of the Sichuan Free Trade Zone.

A ruling from the China Judgments Online shows that in a labor dispute case between Chengdu Tai Rui and an employee, the court filed for enforcement of the effective arbitration award on August 12, 2020, with an enforcement target of 33,500 RMB.

However, the ruling stated that the court, through online enforcement investigation systems and on-site investigations, found no property clues available for enforcement from Chengdu Tai Rui, leading to Long Yujing being subject to high consumption restrictions by the court.

In 2020, Chengdu Tai Rui faced multiple similar labor arbitration cases for unpaid wages, with rulings indicating that Chengdu Tai Rui had no enforceable assets.

According to Tianyancha, on September 21, 2023, due to a network contract dispute with Alibaba Cloud, Chengdu Tai Rui failed to fulfill an effective legal document, resulting in Long Yujing receiving a consumption restriction order from the Hangzhou Internet Court.

In March 2023, the equity of Chengdu Luli Luli Technology Co., Ltd. held by Long Yujing was frozen by the court, as he held 90% of the equity in that company.

Regarding the aforementioned disputes, Long Yujing responded, "Currently, Tai Rui is insolvent and unable to repay its debts."

Founder mined 55 Bitcoins in one day ten years ago

In the reports about Freechat's financing, Jack Long (Long Yujing) revealed that in the early stages of project development, the team bought 78 Bitcoins as reserves for $16,000, spending a total of $1.248 million. Based on the current Bitcoin price of $44,000, the project's Bitcoin reserves have reached $3.432 million, with an unrealized gain of nearly $2.2 million.

Long Yujing told ChainCatcher that it was he and Lao Li who funded the $2 million, allowing the team to buy Bitcoins.

Long Yujing's connection to Bitcoin was first reported in the media in 2013, when he was an early Bitcoin miner, and the Huaxi Metropolitan Daily covered him.

On November 21, 2013, the Huaxi Metropolitan Daily published an article titled "Chengdu Bitcoin Miner: Mined 55 Bitcoins Worth 240,000 RMB in One Day," focusing on Long Yujing.

At that time, Bitcoin had seen a single-day increase of 74%, with prices nearing 6,000 RMB per coin, and the price surge brought Bitcoin into the mainstream media spotlight.

The report stated that Long Yujing started mining Bitcoin in July 2009, making him one of China's earliest Bitcoin prospectors. "Long Yujing told reporters yesterday that he has 60 mining machines hosted in a data center, consuming 9,000 RMB in electricity per day, with impressive output; according to recent market conditions, the Bitcoins mined in a month could be worth several million RMB."

In that report, Long Yujing claimed to have 60 mining machines with a total computing power of 300 TH/S, averaging a daily mining output of 69.2175 Bitcoins, and currently could mine 55 Bitcoins in a day.

Long Yujing told reporters at that time, "Mining still has three to four years of market potential, so I am mining while selling mining machines."

In that ten-year-old report, Long Yujing also mentioned several players in China's Bitcoin scene at the time, including Li Xiaolai, "Pumpkin Zhang" (Zhang Nangen), founder of Jianan Yunzhi, and "Kao Mao."

Long Yujing stated in that report that he was mainly active in the foreign Bitcoin scene, where people referred to him as "Mr. Long."

On January 18, Long Yujing told ChainCatcher that his mining farm was shut down in 2015 due to "too low output."

Long Yujing stated that he exited the scene in 2017 for personal reasons and returned to the crypto space at the end of 2022. He usually only monitors the product iterations of Freechat, providing some resources, and does not interfere, as the core team consists of his former subordinates.