"Home thief" is hard to guard against! A well-known brand reveals an "insider case": 100 million yuan of funds embezzled, 900 million yuan accounts urgently frozen

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Reporter | Zhao Linan

Editor | He Xiaotao Yang Jun Yi Qijiang Proofreader | Xu Shaohang

On March 27, a well-known sleep technology company, Joyoung Home (SH603008, stock price 16.30 yuan, market value 6.003 billion yuan), announced that one of its controlling subsidiaries was allegedly involved in the illegal embezzlement of funds using its position, resulting in as much as 100 million yuan of funds from a bank account being illegally transferred.

A reporter with the Daily Economic News noted that, in order to prevent risks from spreading, Joyoung Home urgently placed multiple bank accounts involving about 900 million yuan under protective self-freezing.

The total amount of funds involved in this case and the frozen funds combined exceeded 1 billion yuan, accounting for 26.54% of the company’s net assets as audited in its most recent period. The proportion of these funds relative to cash and money was even as high as 42.69%.

After the incident, the Shanghai Stock Exchange quickly issued a regulatory work letter. The parties involved include the company’s directors, senior management personnel, and the actual controller.

Regulatory work letter issued by the SSE

On March 27, Joyoung Home’s one-paper announcement pushed the company to the forefront of public attention. Joyoung Home said that recently, the company discovered that funds in bank accounts of its controlling subsidiary, Xitu Technology Co., Ltd. (hereinafter referred to as Xitu Technology), were subject to an illegal transfer.

This is not a typical external scam, but a classic “insider theft” case. After examining the matter, Joyoung Home found that the relevant personnel were allegedly using their position to illegally misappropriate large amounts of company funds. According to the data, the funds illegally transferred in this instance totaled as much as 100 million yuan RMB. The specific accounts involved were the general accounts opened by Xitu Technology at the Hangzhou Branch of Industrial and Commercial Bank of China.

To further prevent funding safety risks and ensure the safety of listed company funds, Joyoung Home has, as of March 26, officially applied to the public security authorities for filing and investigation. At the same time, Joyoung Home has protective frozen the relevant bank accounts that may be involved.

According to the disclosure, as of the date of the announcement, Joyoung Home has three bank accounts in a frozen status among its controlling subsidiaries, with the amount in the cumulatively frozen accounts exceeding 900 million yuan. This large amount of frozen funds is stored in: the general account of Hangzhou Xiyue Furniture Sales Co., Ltd. at the China Citic Bank Hangzhou Dongxin Sub-branch; the general account of Hangzhou Xiyue Furniture Sales Co., Ltd. at the China Citic Bank Hangzhou West Lake Sub-branch; and the general account of Shaoxing Xinxi Furniture Sales Co., Ltd. at the China Citic Bank Hangzhou Qiantang Sub-branch.

Overall, the 100 million yuan illegally transferred funds and the 900 million yuan protected judicial frozen funds, when combined, total more than 1 billion yuan, accounting for 26.54% of the company’s net assets as audited in its most recent period, and 42.69% of the company’s cash and money as audited in its most recent period.

Such a major internal control crisis and unusual use of funds immediately triggered heightened vigilance from regulators. On March 27, the Shanghai Stock Exchange quickly issued a regulatory work letter regarding matters related to the transfer and freezing of account funds of Joyoung Home. The parties covered by this regulatory letter include the listed company itself, and it also clearly covers the company’s directors, senior management personnel, as well as the controlling shareholder and the actual controller.

In response to the above situation, Joyoung Home emphasized in its announcement that the freezing of the bank accounts totaling 900 million yuan is a proactive protective freeze conducted by the company to safeguard fund safety, and there is no situation where the funds were frozen by any third party. The company stated that the matter may have a certain adverse impact on the normal use and operation of funds by the controlling subsidiary in the short term, but after taking the cash flow situation into comprehensive consideration, it will not temporarily pose a material adverse impact on the company’s overall production and business activities.

“Currently, the company is fully cooperating with the public security authorities to investigate and verify the relevant matters. Under the premise of ensuring the safety of funds in the accounts, we will advance the release of the frozen accounts and fully push forward the recovery of illegally transferred funds, striving to eliminate the related adverse impacts as soon as possible and effectively safeguard the legitimate rights and interests of the company and all its shareholders.” Joyoung Home said.

The involved company carries an important mission

The company involved in this incident is Joyoung Home’s controlling subsidiary—Xitu Technology. This company used to be an important piece that Joyoung Home had high hopes for, intending to expand into a new business landscape.

Tracing back to five years ago, in December 2020, at the 12th meeting of the Fourth Session of the Board of Directors, Joyoung Home passed a unanimous resolution with 9 votes in favor, 0 against, and 0 abstentions to approve the proposal on establishing a wholly owned subsidiary through an external investment.

According to the announcement at that time, to further enhance the company’s brand influence and expand its product sales channels, considering the company’s strategic planning and business development needs, it planned to contribute 50 million yuan in the form of monetary funds to establish a wholly owned subsidiary, Xitu Technology.

According to the publicly available information from Tianyancha, Xitu Technology was then formally established in January 2021, with registered capital of 50 million yuan. The company’s legal representative is Zhou Yaying, and its address is Room 2801—2806, Building 2, Shanshui Times Building, No. 26 Yulong Road, Yingfeng Subdistrict, Xiaoshan District, Hangzhou City, Zhejiang Province.

At the time of its establishment, Joyoung Home clearly granted Xitu Technology an extremely important strategic mission—to be responsible for the development and expansion of hotel channel business. Joyoung Home then believed that this external investment aligns with the company’s strategic planning and business development needs. On the one hand, by exploring new business models, it would be conducive to further expanding hotel channels, cultivating new profit growth points, and achieving the company’s sustainable development. On the other hand, by achieving brand exposure through hotel channels and creating new mattress experience scenarios, it can effectively enhance the company’s brand awareness and reputation, thereby strengthening the company’s overall competitiveness.

What is regrettable is that this subsidiary, originally created to enhance the company’s overall competitiveness and tasked with expanding hotel sales channels, has now—perhaps due to severe internal management loopholes—become the source that caused the listed company to “bleed” heavily.

Regarding this sudden black swan incident, Joyoung Home said that as of now, the recovery of illegally transferred funds still has a certain degree of uncertainty. If the funds cannot be recovered, it may have an adverse impact on the company’s net profit. The company will continue to monitor the progress of the above matters and promptly fulfill its information disclosure obligations. Investors are reminded to be mindful of investment risks.

Cover image source: Visual China

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