(Yicai) Dec. 5 -- Chinese e-commerce giant JD.com accused wealth management company Noah Holdings Group of engaging in a malicious lawsuit and misleading investors and the public yesterday as a trial involving CNY30 billion (USD4.2 billion) of fraud committed by a third party over a four-year period gets underway in Shanghai.

JD.com is the unwitting victim in this case and it has greatly damaged the e-commerce giant’s reputation as well as its rights and interests, the Beijing-based company said.

It is a mystery why JD.com would release such an emotionally-charged statement at this key moment in the early stages of the trial, Gopher Asset Management, the Noah unit that is suing JD.com, said yesterday.

The problem started back in 2015 when a business lady called Luo Jing faked JD.com corporate seals to issue false procurement contracts purporting to be a large amount of account receivables owed to her by the e-commerce firm. She then used these documents to raise large amounts of money from Gopher.

Luo continued the practice for four years until she made some poor investments and was unable to repay the borrowed funds, raising investors’ suspicions. A police investigation ensued and at a trial last year, Luo was found guilty of getting staff from her company to alter accounting statements and to pose as JD.com employees to win over Noah’s trust. The case caused losses of over CNY8 billion (USD1.1 billion), and Luo was sentenced to life in prison for fraud.

Gopher launched lawsuits against Luo’s companies and JD.com in July 2019 to seek compensation, it said yesterday.

Gopher's due diligence is noticeably flawed and there are huge loopholes in its management of investment and financing, JD.com said. The company's executive Fang Jianhua, who has previously been sentenced, allegedly accepted huge bribes from Luo and failed to fulfil his responsibilities to investors, resulting in major losses, it added.

Noah has been involved in over 10 similar incidents in recent years involving CNY10 billion (USD1.4 billion), JD.com said, citing public information. The Shanghai-based company hid information from investors many times and was warned or punished by authorities several times. Its risk management is seriously flawed, it added.

Gopher denies the accusations.

Editors: Shi Yi, Kim Taylor