Cypherpunk buys 18% of Zcash mining power in $33.3M deal

Cypherpunk Technologies disclosed Aug. 18 that it acquired 4,902 Zcash mining machines from Moria Mining, an affiliate of Winklevoss Treasury Investments, for $33.33 million. The fleet produces about 4.2 GSol/s across three U.S. sites, representing roughly 18% of Zcash’s current active mining capacity.

The purchase changes Cypherpunk’s exposure to Zcash from mainly holding the token to operating a large mining fleet. The company reported holding 323,394.38 ZEC as of Aug. 11, about 2% of the coin’s circulating supply, and has set a target of owning 5%. Miners receive about 1,440 ZEC per day in network rewards; Cypherpunk said output from the new machines could help finance further ZEC purchases, company growth and investments in privacy technologies.

The transaction was structured as an equity deal rather than a cash sale. Winklevoss Treasury Investments received a pre-funded warrant covering 43.29 million Cypherpunk shares with an exercise price of $0.001. For the purposes of the deal, Cypherpunk valued its shares at $0.77 each. Before the agreement the company had about 107.8 million shares outstanding; full exercise of the warrant would raise the total to roughly 151.1 million shares, making the warrant shares about 28.7% of the enlarged share count.

Most of the warrant shares cannot be issued immediately. The agreement allows an initial issuance of 5.37 million shares now, and Cypherpunk agreed to seek shareholder approval at its next annual meeting for the remaining shares, with the ability to pursue approval at subsequent meetings if needed. The warrant also includes a cap preventing WTI from exercising shares that would push its beneficial ownership above 19.99%.

WTI already holds board influence at Cypherpunk. The investor exercised rights to designate William McEvoy and Khing Oei as directors, and Cypherpunk’s governance committee approved the mining purchase as a related-party transaction.

The company appointed Kevin Zhang as head of mining. The announcement quoted Zhang as saying, “Current Zcash mining economics generate stronger returns than Bitcoin mining and artificial-intelligence colocation.” The announcement also included a joint statement from Cameron and Tyler Winklevoss: “Up until now, investors have had limited options for Zcash mining exposure. With the acquisition of this mining fleet, Cypherpunk changes that.”

The acquisition expands Cypherpunk’s operational footprint in Zcash immediately while leaving much of the equity cost contingent on shareholder votes. Upcoming proxy votes will determine how many shares the company may issue to support its combined strategy of mining operations and a growing ZEC treasury.