SecProbe.io

United States securities and exchange commission logo
August 29, 2023
George Lai
Chief Financial Officer
The9 LTD
17 Floor, No. 130 Wu Song Road
Hong Kou District, Shanghai 200080
People’s Republic of China
Re:The9 LTD
Form 20-F for the Year Ended December 31, 2022
Correspondence Filed April 28, 2023
File No. 1-34238
Dear George Lai:
            We have reviewed your April 28, 2023 response to our comment letter and have the
following comments.  In some of our comments, we may ask you to provide us with information
so we may better understand your disclosure.
            Please respond to these comments within ten business days by providing the requested
information or advise us as soon as possible when you will respond.  If you do not believe our
comments apply to your facts and circumstances, please tell us why in your response.
            After reviewing your response to these comments, we may have additional
comments.  Unless we note otherwise, our references to prior comments are to comments in our
April 25, 2023 letter.
Annual Report on Form 20-F for the Fiscal Year Ended December 31, 2022
General
1.We note your response to prior comment 3.  Your analysis is incomplete.  For example,
your analysis does not address all types of NFTs that you issue, such as those referenced
in the following statement:  “certain NFTs may entitle our customers to additional perks,
such as merch items, gifts, participation in events organized by NFTSTAR.”  Your
analysis also does not address your role in supporting the secondary price of the NFTs or
your ongoing right to receive a percentage of the proceeds of secondary sales of the
NFTs.  Further, your analysis is conclusory and does not provide support for many
assertions.  Finally, your analysis with respect to your pre-May 2022 activities and post-
May 2022 activities is identical and does not address the differences in such activities or

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your role in such activities.  Please supplementally provide us with a revised legal analysis
addressing these issues.
2.In future filings, provide disclosure of any significant crypto asset market developments
material to understanding or assessing your business, financial condition and results of
operations or share price since your last reporting period, including any material impact
from the price volatility of crypto assets.
3.We note that you hold Filecoin and generate revenue from Filecoin mining.  The
Commission is of the view that Filecoin meets the definition of a security under the U.S.
federal securities laws.  In future filings please revise your disclosure where appropriate to
provide a detailed discussion regarding the impact this may have on your business,
financial condition and results of operations.
Risk Factors
Risk Factors Related to Our Company and Our Industry, page 17
4.We note that you are not authorized or permitted to offer your products and services to
customers outside of the jurisdictions where you have obtained the required governmental
licenses and authorizations. In future filings, describe any material risks you face from
unauthorized or impermissible customer access to your products and services outside of
those jurisdictions.  Describe any steps you take to restrict access of U.S. persons to your
products and services and any related material risks.
While NFTs themselves are not likely to be classified as securities, page 34
5.Please revise to remove your legal analysis and conclusions, including the statement here
and on page 2 that the “NFTs themselves are not likely to be classified as securities.”
Please also revise to remove your legal analysis from the disclosure on pages 88 and 89.
Cryptocurrency Mining, page 85
6.In future filings, please clearly disclose the locations of the mining facilities that host your
miners, the numbers of miners hosted and the hash rate of the miners hosted. In
addition, identify the entity that manages the mining facility, and disclose the material
terms of each agreement with the mining facility, including the term, termination
provisions, the services provided and the fees.
7.In future filings, please expand your description of your miners to disclose the types of
miners you own, the average, mean and range of ages of the miners and the average, mean
and range of the energy efficiency of your miners.
8.In future filings, please disclose the policies related to the uses for your mined Bitcoin and
mined Filecoin, and disclose how you monetize your Bitcoin and Filecoin, including
exchanges you use to monetize Bitcoin and Filecoin, whether you have any agreements
with any exchanges, and the percentage of your crypto asset holdings that you store on
any exchanges' platform.  In this regard, we note your disclosure on page 30 that many of

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your crypto assets are held by exchanges. In addition, we note that you hold other types of
crypto assets.  Please identify here the types and amount of such crypto assets and discuss
the purpose of holding other types of crypto assets.
9.In future filings, please identify the mining pool operators you use for your Bitcoin mining
operations, disclose the material terms of these mining pool agreements and state whether
or not all of your Bitcoin miners participate in the mining pools.  In addition, please
disclose whether these mining pools provide services only for Bitcoin mining, or if they
are multi-crypto asset mining pools, the fees associated with participating with the mining
pools and whether payouts are limited to only Bitcoin.  Similarly, disclose whether or not
you participate in Filecoin mining pools, and, if so, identify the mining pool operators you
use for your Filecoin mining operations, whether the mining pools provide services only
for Filecoin mining or if they are multi-crypto asset mining pools, the fees associated the
mining pools and whether the payouts are limited only to Filecoin.
10.In future filings, please include a comprehensive breakeven analysis for your Bitcoin
mining operations, your Filecoin mining operations and any other crypto assets that you
earn or mine that compares the cost to earn/mine one crypto asset with the value of the
crypto asset.  Your analysis should identify and explain the inputs used in your
calculation.
11.In future filings, please revise your disclosure to describe the terms and provisions of your
insurance policies covering your crypto assets in the event of loss or fraud, including the
amount of coverage, the term, the termination provisions, the renewal options and the
limitations on coverage.  In addition, please disclose the material terms of your insurance
policies covering your miners.  To the extent that you do not have insurance coverage for
your crypto assets or miners, please add risk factor disclosure as appropriate.
12.We note your disclosure on page 83 that in July 2022 you changed to self-custody.  In
future filings, please revise to disclose your custody procedures, including, what portion
of your Bitcoin, Filecoin and other crypto assets are held in hot wallets and cold
wallets, the geographic location where digital assets are held in cold wallets, and any other
security measures used.
13.In future filings, regarding any crypto assets held by any mining pools in which you
currently, or plan to, participate, discuss how such crypto assets are held by the pool,
including whether it is required to hold crypto assets in cold storage, what security
precautions it is required to undertake, what inspection rights you have, and what type of
insurance the pool operator is required to have to protect you from loss.
Information on the Company
Business Overview, page 85
14.In future filings, clarify whether you have material assets that may not be recovered or
may otherwise be lost or misappropriated due to the bankruptcies of entities in the crypto
asset market and other related businesses.

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15.In future filings, if material to an understanding of your business, describe any direct or
indirect exposures to other counterparties, customers, custodians, or other participants in
crypto asset markets known to:
•Have filed for bankruptcy, been decreed insolvent or bankrupt, made any assignment
for the benefit of creditors, or have had a receiver appointed for them.
•Have experienced excessive redemptions or suspended redemptions or withdrawals
of crypto assets.
•Have the crypto assets of their customers unaccounted for.
•Have experienced material corporate compliance failures.
16.In future filings, to the extent material, explain whether your crypto assets or mining
machines serve as collateral for any loan, margin, rehypothecation, or other similar
activities to which you or your affiliates are a party.  If so, identify and quantify the crypto
assets or mining machines used in these financing arrangements, and disclose the nature
of your relationship for loans with parties other than third-parties.  State whether there are
any encumbrances on the collateral.  Discuss whether the current crypto asset market
disruption has affected the value of the underlying collateral.
NFT Business
Our roles in the NFT business, page 88
17.We note your disclosure on page 88 that prior to May 2022, NFTSTAR operated a
platform in which users could open accounts in order to be able to purchase and sell your
minted NFTs but that, in May 2022, you offered your NFTs on third-party platforms.  In
future filings please disclose whether you still operate a platform in which users may
purchase and sell NFTs.
18.In future filings, please explain the rights and obligations of the NFTs you have minted
and issued.  In this regard, we note your disclosure that you provide auxiliary
entertainment to NFT holders like a blockchain-based on-line game, MetaGoal in which
users may use their NFTs to earn in-game currency or player cards and that certain NFTs
entitle customers to additional perks such as merchandise items, gifts and participation in
events organized by NFTSTAR.  Please disclose the number and type of NFTs
outstanding and the number of NFTs that you have re-purchased.
19.In future filings, please discuss your internal policies and procedures for conducting due
diligence for anti-money laundering, know your customer, and/or compliance with the
Office of Foreign Assets Control related requirements.
20.In future filings, please identify the risks to NFT holders and your platform users' assets in
the event of insolvency or bankruptcy of any The9 Limited entities.
21.In future filings, please disclose whether you accept crypto assets as payments for NFTs
or services provided by your platform.  If so, please disclose the crypto assets you accept
as payment, how you determine the value of such crypto assets and your policies related
to monetizing such crypto assets.

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22.In future filings, please disclose the services your currently offer on your platform.  To the
extent that you offer wallets to NFTs holders and/or others and hold customer assets on
your platform, please revise to disclose the steps you take to safeguard your
customers' crypto assets, describe any policies and procedures you have regarding the
commingling of assets, including customers' assets, your assets and those of affiliates or
others.  In addition, identify what material changes, if any, have been made to your
processes in light of the current crypto asset market disruption.
23.In future filings, please disclose whether you offer your NFTs or any other services to
U.S. persons and within the U.S.
Internal procedures, page 90
24.Refer to your response to comment 1.  We note your disclosure:

•On page 35, "Public statements by senior officials at the SEC indicate that the SEC
does not currently intend to take the position that Bitcoin or Ethereum are securities
in their current form;"
•On page 35, "Bitcoin and Ethereum are the only cryptocurrencies as to which senior
officials at the SEC have publicly expressed a view;"
•On page 35, "With respect to all other cryptocurrencies, there is currently no certainty
under the applicable legal test that such assets are not securities';"
•On page 90, "The legal test for determining whether any given crypto asset is a
security . . . evolves over time, and the outcome is difficult to predict;" and
•On page 90, "The SEC generally does not provide advance guidance or confirmation
on the status of any particular crypto asset is a security."

In future filings please remove or revise these statements in light of the fact that the
Commission has identified numerous crypto assets as securities, the reference to public
statements about Ethereum in its current form are inaccurate, the legal tests are well-
established by U.S. Supreme Court case law, and the Commission and staff have issued
reports, orders and statements that provide guidance on when a crypto asset may be a
security for purposes of the U.S. federal securities laws.
Operating and Financial Review and Prospects, page 111
25.In future filings, to the extent material, explain whether, to your knowledge, crypto assets
you have issued serve as collateral for any other person’s or entity’s loan, margin,
rehypothecation or similar activity.  If so, discuss whether the current crypto asset market
disruption has impacted the value of the underlying collateral and explain any material
financing and liquidity risk this raises for your business.

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Item 5. Operating and Financial Review and Prospects
Results of Operations
Year 2022 Compared to Year 2021, page 118
26.You disclose that in 2021 you recognized a gain on rebooking the investment in FF
Intelligent. Please tell us the amount of the gain recognized and how you applied the
accounting literature to your facts and circumstances.
Item 15. Controls and Procedures
Management's Annual Report on Internal Control Over Financial Reporting, page 163
27.Please respond to the following:
•You disclose that your management, with the participation of your chief financial
officer and internal audit manager, evaluated the effectiveness of your internal
control over financial reporting. We note from Exhibits 12.1 and 12.2 that your
principal executive officer is your CEO and your principal financial officer is your
CFO. Tell us whether your principal executive officer participated in the evaluation
of the effectiveness of your internal control over financial reporting and why you do
not refer to that participation in your disclosure. Refer to Rule 13(a)-15(c) under the
Exchange Act.
•You disclose that management concluded that the company did not maintain effective
internal control over financial reporting as of December 31, 2022 due to a significant
deficiency related to the untimely period-end closing at the subsidiary level for
certain subsidiaries. Tell us in sufficient detail why you refer to the matter identified
as a significant deficiency and not a material weakness. Refer to AS 2201.62 to
2201.70 and 2201.A7 and .A11.
Consolidated Financial Statements
Report of Independent Public Accounting Firm, page F-3
28.Please respond to the following:
•We note that the report of RBSM LLP does not refer to an audit of the
schedule. Amend the the filing to include an audit report that includes a reference
to the schedule included pursuant to Rule 12-04 of Regulation S-X. Refer to AS
3101.
•Ask RBSM LLP to amend their re