SCHEDULE: YZi Labs, CZ Disclose 5% Stake in CEA Industries, Seek Board Changes

YZi Labs and Changpeng Zhao have disclosed a 5% beneficial ownership in CEA Industries Inc. and are seeking to influence corporate governance, including board composition.

Summary

• YZi Labs Management Ltd. and Changpeng Zhao (CZ) have filed a Schedule 13D, disclosing beneficial ownership of 2,150,481 shares, representing 5.0% of CEA Industries Inc. common stock.
• The shares were acquired in connection with CEA Industries' $500 million private placement offering (PIPE) that closed on August 5, 2025, at a price of $10.10 per share.
• YZi Labs also acquired 7,750,510 pre-funded warrants, 9,900,991 stapled warrants, and 3,564,359 strategic advisor warrants, though these are subject to beneficial ownership limitations (typically 4.99%) preventing immediate full exercise.
• YZi Labs entered into a Strategic Advisor Agreement with CEA Industries on August 5, 2025, to provide strategic advice in the crypto technology sector.
• YZi Labs also entered into a Strategic Services Agreement (SSA) with 10X Capital Asset Management LLC (asset manager for CEA Industries) on August 5, 2025, to provide strategic advisory services related to digital asset strategies and treasury management, specifically focusing on BNB and BNB equivalents.
• The Reporting Persons intend to engage in discussions with CEA Industries' board and management regarding board composition, management team, and opportunities to enhance corporate governance and stockholder value.
• A preliminary consent statement on Schedule 14A was filed on November 26, 2025, to solicit written consents to expand the Board and elect new members.
• Changpeng Zhao received a full and unconditional pardon from President Trump on October 21, 2025, for a 2023 conviction related to failure to maintain an effective Anti-Money Laundering Program.

Sentiment

Score: 8

Explanation: The filing indicates a significant strategic investment and partnership with YZILabs and Changpeng Zhao, bringing substantial capital ($500 million PIPE) and specialized expertise in digital asset treasury management, particularly within the BNB ecosystem. The intent to enhance corporate governance and stockholder value, coupled with the structural protections for treasury assets, suggests a strong positive outlook for CEA Industries' strategic direction and financial health.

Positives

• A Strategic Services Agreement with YZILabs Management Ltd. and Changpeng Zhao (CZ) brings expertise in digital asset strategies, particularly the BNB ecosystem, to CEA Industries.
• The company's treasury strategy will primarily focus on BNB and BNB-related instruments, including staking, restaking, and liquid staking, aiming to generate yield.
• A significant portion of the capital raised (majority of the $500 million PIPE proceeds) will be allocated to the BNB Treasury Strategy.
• The establishment of a bankruptcy-remote Delaware LLC (CEA BRS LLC) for treasury assets provides structural protection against creditor claims.
• The involvement of YZILabs and CZ, who led the $500 million PIPE, signals strong investor confidence and strategic alignment.
• The intent to enhance corporate governance and stockholder value through board and management discussions could lead to positive changes.

Negatives

• Changpeng Zhao's past conviction for failure to maintain an effective Anti-Money Laundering Program, even with a subsequent pardon, could raise concerns for some investors regarding regulatory risk perception.
• The beneficial ownership limitations on warrants (4.99% for Pre-Funded and Stapled, 9.99% for Strategic Advisor Warrants) restrict immediate full exercise, potentially limiting the Reporting Persons' immediate voting power or economic upside from warrant exercise.
• The Strategic Services Agreement includes a liquidated damages clause requiring CEA Industries' asset manager (10X Capital) to pay all future fees to YZILabs if the agreement is terminated without cause by 10X Capital or for cause by YZILabs, which could be a significant financial obligation.
• The agreement specifies that YZILabs is not acting as a fiduciary or investment advisor, and CEA Industries is not relying on YZILabs for investment advice, placing full responsibility for investment decisions on CEA Industries.
• The focus on BNB and BNB equivalents, while a strategy, also concentrates risk within a specific digital asset ecosystem.

Risks

• Regulatory, legal, or compliance risk to YZILabs or its shareholders if continuing to perform obligations under the Strategic Services Agreement.
• Material change in CEA Industries' operations, structure, ownership, financial condition, business model, or strategic direction away from BNB could adversely affect the basis of the Strategic Services Agreement.
• The Customer (10X Capital) is liable for fraud, willful misconduct, bad faith, or negligence under the Strategic Services Agreement.
• The Customer (10X Capital) is liable for liquidated damages if the Strategic Services Agreement is terminated under certain conditions.
• The Advisor (YZILabs) is not liable for losses except in cases of gross negligence, willful misconduct, or fraud (Disqualifying Action).
• The Customer (10X Capital) indemnifies Covered Persons (YZILabs, its affiliates, officers, directors, agents, employees) against losses related to CEA Industries' operations, business, or affairs, or regulatory inquiries concerning the BNB Treasury Strategy, except for Disqualifying Actions by Covered Persons.
• The BNB Treasury Strategy's primary focus on BNB and BNB-related instruments concentrates investment risk within a specific digital asset ecosystem.
• The Treasury Subsidiary (CEA BRS LLC) is prohibited from incurring liabilities or indebtedness outside the ordinary course of business, which could limit financial flexibility.
• The Customer (10X Capital) must ensure the Company does not issue preferred securities or instruments with senior economic/governance rights without YZILabs' consent, potentially limiting future capital structure flexibility.

Future Outlook

The Reporting Persons intend to continuously review their investment in CEA Industries and may engage in further discussions with the Board and management regarding corporate governance, board composition, management team, and opportunities to enhance stockholder value. They may also consider purchasing or selling additional shares, engaging in hedging, or proposing changes to the company's capitalization or structure. A preliminary consent solicitation has been filed to expand the Board and elect new members.

Management Comments

• President Trump stated that he was informed Mr. Zhao 'was not guilty of anything,' that 'what he did is not even a crime,' and that 'he was persecuted by the Biden Administration' regarding his pardon.
• White House Press Secretary Karoline Leavitt explained that Mr. Zhao's prosecution was motivated by the previous Administration's 'desire to punish the crypto industry.'

Industry Context

This filing highlights a growing trend of traditional asset management firms and publicly traded companies integrating digital asset strategies, particularly within specific blockchain ecosystems like BNB Chain. The involvement of a prominent figure like Changpeng Zhao and a specialized digital asset advisor like YZILabs underscores the increasing institutional interest and strategic adoption of cryptocurrencies for treasury management and yield generation, moving beyond simple speculative holdings. The emphasis on non-fiduciary advisory roles and bankruptcy-remote structures also reflects efforts to navigate evolving regulatory landscapes and mitigate risks associated with digital assets.

Comparison to Industry Standards

• The establishment of a bankruptcy-remote Delaware LLC (CEA BRS LLC) for treasury assets aligns with best practices in asset protection and segregation, similar to structures used by institutional investors and crypto funds to shield digital assets from general corporate liabilities.
• The focus on BNB and BNB-related instruments for treasury management is a specific, concentrated strategy, differing from more diversified crypto treasury approaches seen in companies like MicroStrategy (primarily Bitcoin) or those holding a broader basket of digital assets.
• The explicit disclaimer that YZILabs is not acting as a fiduciary or investment advisor is a common practice in the evolving digital asset advisory space, where regulatory clarity for investment advice on digital assets is still developing, contrasting with traditional financial advisory services that typically operate under fiduciary duties.
• The 4.99% beneficial ownership limitation on warrants is a standard mechanism to avoid triggering certain reporting requirements or control thresholds under U.S. securities laws, commonly seen in PIPE transactions involving strategic investors.

Management Changes

Corporate Governance

Legal Proceedings

• Changpeng Zhao pleaded guilty on November 21, 2023, to a single count of Failure to Maintain an Effective Anti-Money Laundering Program in the U.S. District Court for the Western District of Washington, sentenced to four months in prison and a $50 million fine.
• Mr. Zhao received a full and unconditional pardon from President Trump on October 21, 2025, for the above-referenced conviction.

Related Party Transactions

• YZi Labs Management Ltd. (Reporting Person) entered into a Strategic Advisor Agreement with CEA Industries Inc. (Issuer).
• YZi Labs Management Ltd. (Reporting Person) entered into a Strategic Services Agreement with 10X Capital Asset Management LLC (asset manager of CEA Industries Inc.).
• Changpeng Zhao (Reporting Person) is the sole director of YZi Labs Management Ltd.

Stakeholder Impact

• Shareholders: Potential for enhanced shareholder value through improved corporate governance, strategic direction in digital assets, and the backing of a prominent crypto figure. The $500 million PIPE provides significant capital.
• Management/Board: Subject to potential changes in composition and increased scrutiny from a significant strategic investor.
• Customers/Suppliers: No direct immediate impact mentioned, but a strong financial position and clear strategic direction could indirectly benefit business relationships.
• Creditors: The establishment of a bankruptcy-remote Treasury Subsidiary (CEA BRS LLC) protects treasury assets from general corporate creditor claims, potentially improving the security of those specific assets.
• Employees: No direct immediate impact mentioned.

Next Steps

• Reporting Persons intend to engage in ongoing discussions with CEA Industries' board and management regarding board composition, management team, and opportunities to enhance corporate governance and stockholder value.
• A preliminary consent statement on Schedule 14A has been filed to solicit written consents to expand the Board and elect certain persons to fill vacancies.
• YZILabs will provide strategic advisory services to 10X Capital Asset Management LLC related to digital asset strategies and treasury management for CEA Industries.
• CEA Industries is expected to adhere to the BNB Treasury Strategy, primarily investing in BNB and BNB-related instruments.
• The Customer (10X Capital) will use commercially reasonable efforts to procure that CEA Industries establishes and maintains a Strategic Committee, with YZILabs having the opportunity to nominate one member.

Key Dates

Recommendation

The filing details a substantial strategic investment and partnership with YZILabs and Changpeng Zhao, including a $500 million PIPE. This brings significant capital and specialized expertise in digital asset treasury management, particularly within the BNB ecosystem. The commitment to enhancing corporate governance, establishing a bankruptcy-remote structure for treasury assets, and the clear strategic direction in a high-growth sector position CEA Industries for strong potential upside. The involvement of a prominent figure like Changpeng Zhao, despite past legal issues now pardoned, adds credibility and strategic depth to the company's digital asset initiatives, making it an attractive investment opportunity.

Keywords

Digital Assets, BNB, Cryptocurrency, Treasury Management, Strategic Advisor, Corporate Governance, Schedule 13D, PIPE, Warrants, CEA Industries, 10X Capital, YZILabs, Changpeng Zhao, Blockchain, Staking, Asset Management