On Monday, Chinese streaming video service Le.com reported that the China Securities Regulatory Commission (CSRC) had fined the company 240 million yuan ($37 million) for a financial fraud running from 2007 to 2016. Jia Yueting, the co-founder and head of Le.com, was also fined 241 million yuan ($36.8 million).
The investigation found that the documents related to the IPO application and the annual reports from 2010 to 2016 submitted by Le.com were suspected to be false. In addition, the company failed to disclose related transactions and the guarantee for companies such as Le.com Holding Ltd. as required by the law. The non-public offering of shares of Le.com in 2016 constituted a fraudulent issue.
Le.com, a once-popular website providing low-cost videos to customers, made its debut on China’s NASDAQ-style board, ChiNext, in August 2010. However, due to a funding problem in 2016, the company reduced the staff, while Jia himself went to the US on the grounds that he planned to raise funds for Faraday Future, one of subsidy of Le.com specialized in the production of electric vehicles.
In July 2020, Jia announced on Weibo that his personal bankruptcy reorganization process had finally been completed in the United States and he no longer owned equities in Faraday Future. Le.com was delisted from the Shenzhen Stock Exchange in May last year, with a total market value of 718 million yuan ($110 million).
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Although the details of Le.com’s fraud have not been disclosed, its length has shocked observers. The reason why Le.com’s bill has been set according to the old securities law is that the fraud happened before 2016, the year when the new securities law took effect.
Le.com was already controversial when it went public. At that time, the company lagged behind other domestic video websites in terms of run time, user scale and market share. But it was the first to be listed at the A-share Market while its peers were experiencing big losses.
With the soaring stock prices of A-share Internet firms after 2014, its highest market value reached more than 160 billion yuan ($24 billion), exceeding Huaxia Bank on the mainboard market. Therefore, its financial statement was widely questioned.
Faraday Future, the company Jia also devoted himself to, submitted S4 listing documents to the Securities and Exchange Commission (SEC) on April 5, stressing that its list is expected to be finished in May. The firm will deliver its first batch of vehicles in 2022 and more than 450,000 units by 2025, according to the listing document.
Chen Xuefeng, a former executive of Chery Jaguar LandRover Automotive Co., Ltd., serves as the CEO of Faraday Future China and is responsible for operations ranging from project implementation and production strategy to localized product development and user experience.