(Yicai Global) Sept. 8 -- Regulators in China slapped Leshi Internet Information and Technology, a struggling companyonce known as China’s Netflix, with the country’s biggest-ever financial penalty for stock fraud.

The China Securities Regulatory Commission fined Leshi CNY240 million (USD35.1 million), equivalent to5 percent of the funds it raised in its IPO, the Beijing-based company said in a statement yesterday. Though running deep in the red, the cash-strapped business does have the means to pay.

The CSRC imposed the punishment after wrapping up an investigationinto suspectedillegal information disclosure andfraud around offerings. The watchdog opened the investigation on April 26 last year. But Leshi’s statementdid not state which share offering formed the subject of the fine.

Based on the amount, the offense must relate to a private placement of shares in 2016 that raised CNY4.8 billion. Leshi raised about CNY730 million in its 2010 listing on theChiNext,the Shenzhen Stock Exchange’s Nasdaq-style technology board.

Leshi was delisted on July 21,after losing a total ofCNY30 billionover three straight years that pushed it over the threshold for removal.It was already in debt and teetering on the edge of insolvency before delisting. The record fine can have only worsened its plight.

As of the end of June, the company had CNY142 million in revenue, total assets of CNY5.69 billion, CNY20.85 billion in total liabilities, and CNY14.62 billion of negative net assets, according to its semi-annual earnings report.

Government-imposed penalties take priority over all other claims. The company will be able to pay because it had a cash balance of CNY271 million at the end of June.

Leshi has been dragged through the mud by disgraced founder Jia Yueting who borrowed heavily in its name to diversify into new energy vehicles and other ventures that have soured.

Jia, the largest shareholder with a 23.1 percent stake, his elder brother Jia Yuemin, who has 1.6 percent, and parent company Leshi Holding, which holds 0.6 percent, have all had their shares frozen as a probe into the finances of Jia’s businesses continues.

Leshi’s revenue from advertising, subscribers and content has plunged from the lasting taint to its brand and goodwill from the various scandals, it added. Income from long-term assets such as copyrights to movies and television dramas no longer cover their production costs.

Editor: Ben Armour