BY SILVI WRITER
China’s securities regulator launched a formal investigation of debt-ridden fugitive businessman and disgraced entrepreneur Jia Yueting (贾跃亭) and Leshi Internet Information & Technology Corp., the Shenzhen-listed unit of LeEco, which Jia founded.
Both are being probed for alleged violations of information disclosure regulations, according to a regulatory filing Monday by Leshi. Leshi said the company and Jia will actively assist in the regulator’s investigation.
Jia is one of China’s most high-profile entrepreneurs who once openly challenged Apple and Tesla for being outdated. He ran into trouble as his business crumbled under the weight of heavy debt last year.
Leshi faces the risk of delisting after it posted negative net assets of 3 billion yuan at the end of 2018. The company’s shares have been suspended since Friday awaiting the regulator’s further decisions.
Jia went into self-exile in the US after missing a deadline set by the Beijing Securities Regulatory Bureau, which ordered him to return to China before the end of 2017.
Jia, who has remained outside China since the summer of 2017, holds a 24.43 percent stake in Leshi, most of which have been frozen or pledged as collateral, Leshi’s annual report showed. He left behind massive debts, which reached 11.9 billion yuan at the end of 2018.
In the first quarter of this year, Leshi’s revenue was 128.88 million yuan, slipping by 70.54 percent year-on-year, according to the company’s financial report.
In an open letter published in 2017, Jia had asked his wife and younger brother to represent him and handle regulatory issues relating to the billions owed in China. However, he insisted that he would “do everything he could to solve any debt problems with both the listed and unlisted companies”, from the US.
A Shanghai regional court in February ruled that LeEco-owned LeView Mobile Ltd must pay debt of RMB 530 million (roughly $78 million) to the Shanghai-based private equity firm Leyu Fund. The creditor is also allowed to sell 39.63 percent shares of Leshi Chuangjing Technology owned by LeEco, if LeView Mobile refuses to comply.
Both Jia himself and LeEco were ruled to bear joint liability by the court.
Records show Leyu Fund signed a loan contract with Jia and his companies in May 2015, offering an amount totaling RMB 410 million with a 15 percent interest rate over the period of three years. It filed a lawsuit against LeView Mobile Ltd as well as its parent company LeEco to Shanghai Senior People’s Court in July 2017, as the debtors failed to fulfill its obligations after the due date.
“Everyone was competing to get shares of investments back then,” Chinese media Caijing Magazine reports, citing an anonymous person from Leyu Fund’s limited partners.