(Yicai) Sept. 22 -- A Chinese court has ruled that Leshi Internet Information & Technology Beijing, a struggling internet firm once known as ‘China’s Netflix,’ must compensate investors to the tune of CNY2 billion (USD274 million) for losses they incurred as a result of its false financial statements.

Leshi must remunerate the plaintiffs for losses on their investments, commission, and stamp duty within 10 days of the verdict, according to media reports that cited a lawyer who referred to a first-instance ruling made by the Beijing Financial Court earlier this week.

Leshi, also known as LeEco, was founded in 2004 by businessman Jia Yueting. After initially focusing on online video streaming services, it became mired in debt by the end of 2016 after Jia borrowed heavily to expand into other areas, including smartphones, smart televisions, and electric vehicles.

Jia fled to the United States in 2017 to escape the mounting debt crisis and focus on developing EV startup Faraday Future. He still has not returned.

In March 2021, Leshi was found guilty of cooking the books of every annual financial report from 2007 to 2016 and was fined CNY240 million (USD32.9 million) by regulators, equivalent to 5 percent of the amount raised in its initial public offering and the country’s biggest-ever financial penalty for stock fraud.

Jia is also required to shoulder joint indemnity, the Beijing Financial Court said. Ping’an Securities, which underwrote Leshi’s IPO, must bear proportionate liability within a scope of 10 percent, and five accounting firms must also share liability ranging from 0.5 percent to 1.5 percent.

The CNY2 billion penalty is less than half of the CNY4.6 billion in compensation that Shanghai Junying Asset Management and 1,999 other entities were claiming in a civil indictment filed against Leshi and 21 related firms in January last year. Shanxi Securities reported the case at the time, citing the court document seen by its owner Zhong De Securities

Leshi, which had liabilities of CNY20.9 billion (USD2.8 billion) as of Sept. 30, 2020, was kicked off the Shenzhen bourse in May 2020 due to its failure to regain a positive net worth. The firm still has over 400 employees and its income mainly comes from online video subscriptions, adverts and office rent, according to its microblogging Weibo account.

The Beijing Financial Court, set up in January 2021, is a specializes in handling financial and economic cases.

Editor: Kim Taylor