Chinese Regulators Are Said to Start Reviewing Leshi Internet

  • Banking and market regulators said to be going over its books
  • Leshi is the main listed entity of Jia Yueting’s LeEco empire

China’s securities and banking regulators have begun probing the finances and disclosures of Leshi Internet Information & Technology Corp., the main listed business of the LeEco conglomerate, people familiar with the matter said.

The China Securities Regulatory Commission has started pulling documentation on Leshi for review, the people said, asking not to be identified talking about a probe. They’re also examining pledges of Leshi stock made in return for loans, they said. Separately, the China Banking Regulatory Commission is contacting financial institutions to get a better sense of their exposure to the company, the people said.

It wasn’t clear if the regulators have contacted Leshi directly. The company declined to comment, while the CSRC and CBRC didn’t immediately respond to faxed requests for comment.

The simultaneous investigations don’t imply wrongdoing and may not result in any disciplinary action, the people said. But they turn up the heat on LeEco and its outspoken founder Jia Yueting, who built his wealth on Leshi’s Netflix-like streaming services before borrowing aggressively to bankroll costly forays into cars, smartphones and film. His conglomerate has since slashed jobs and retreated from some businesses in an effort to rein in spending amid a cash crunch.

Jia has asked for more time to repay loans, after a Chinese court froze billions of dollars in assets he controlled, while also stepping down from some executive roles. Leshi has been suspended from trade since April as it debated an internal restructuring. In May, Zhong De Securities, one of its deal sponsors, said Leshi had misused 881 million yuan ($130 million) -- intended for content rights -- to replenish working capital.

— With assistance by Steven Yang, and David Ramli

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