More than 36 million funds were frozen! Big seller initiated arbitration against Amazon

In 2021, a massive Amazon "account ban wave" took place in the cross-border e-commerce industry.

During this turmoil, about 600 Chinese brands and 3,000 seller accounts were officially frozen by Amazon due to merchants' illegal operations, including " manipulating reviews ", " brushing orders " , " illegal account association " , and even non-compliant behaviors such as falsifying identities, bribery (cooperating with third-party gray industries), and selling illegal products .

At that time, a number of cross-border sellers such as ZEBO, Youkeshu, and Paton were not immune to the account suspension storm. Now, nearly two years have passed since the account suspension wave, and there are still big sellers entangled with Amazon and taking them to court.

The amount involved is nearly 40 million, Xinghui shares initiated arbitration against Amazon

Last week, Shenzhen's well-known Zebao's parent company Xinghui Holdings disclosed a number of lawsuits and arbitration cases in the past year , involving a total amount of 46.7968 million yuan . The most concerned arbitration case was the one involving Amazon .

According to the announcement , Sunvalleytek International, INC. ( hereinafter referred to as " STK " ) , a US subsidiary of Star Emblem Holdings , took Amazon to court as the plaintiff. The reason for the case was account freezing and the amount involved was US $ 5.258 million .

Specifically, STK believes that Amazon has violated various agreements such as supplier terms and closed its supplier account. Therefore, last October, STK initiated arbitration to release the $ 525.8042 million in the blocked account , which was converted to about 37.3773 million yuan ( 1 US dollar = 7.1086 RMB ) at the time of the RMB exchange rate , and 36.2374 million yuan ( 1 US dollar = 6.8918 RMB ) at the latest exchange rate at the time of publication .

Currently, the case is still in the trial stage , and the arbitration committee is the American Arbitration Association ( AMA ) .

In 2021 , Amazon began to conduct large-scale and strict investigations and crackdowns on sellers suspected of illegal operations . First, it conducted a second and third review of the accounts, and then strictly checked postcards , gift cards , and evaluation requirements . After closing a wave of illegal accounts, it started a new wave of post-account associations .

At the end of this account blocking operation, from billion-dollar sellers to unknown small and medium-sized sellers, all the victims were stuck in the quagmire. Small sellers had no stores, medium-sized sellers had only a few accounts left to "linger on", and big sellers had a large amount of product inventory and huge amounts of funds frozen after being swept away.

An unexpected "wave of account bans" caught a number of Amazon sellers who were racing in the cross-border race off guard . Some left the market in disgrace, while others are still recovering from the pain.

To this day, many sellers who have been hurt by the account blocking wave are still traumatized. While operating in compliance with regulations, big sellers are slowly curing their Amazon addiction and developing more cross-border e-commerce platforms. However, Xinghui shares are still accused of fake orders.

It is reported that STK , a subsidiary of Xinghui Holdings , was sued for launching an activity that provided payment and rewards for online product reviews, which led to consumers being deceived and misled when purchasing its products . The practice of brushing orders and reviews even pushed its lower-quality products to start charging a premium, causing consumers to suffer economic losses . The amount involved in the lawsuit is as high as 5 million US dollars .

The final outcome of the case is still unknown, but after the wave of account blocking, many big sellers have been "keeping a low profile" when facing Amazon , but Zebao actually dared to "dance in the minefield"?

Back to the STK v. Amazon case itself. In the early days of the account suspension, most sellers tried to recover their accounts and unblock their funds through in-site appeals, but with little success. It remains to be seen whether STK, a subsidiary of Star Emblem Holdings, will succeed this time.

It is understood that the process from submitting an arbitration application to the final ruling is expected to take more than half a year. As the world's largest conflict management and dispute resolution organization , AMA has arbitration precedents for sellers whose accounts were frozen by Amazon . Previously, a seller in Dongguan got back all the funds frozen by Amazon through arbitration .

Unable to save itself? Xinghui shares is in a mess

Previously, Xinghui Shares announced its 2022 performance forecast, but received a letter of concern from the Shenzhen Stock Exchange for not disclosing issues such as goodwill, inventory, and accounts receivable impairment provisions , questioning whether it had adjusted the company's net assets through impairment provisions . Xinghui Shares denied this .

In fact, it is not surprising that the Shenzhen Stock Exchange has such doubts.

At that time, after Xinghui Co., Ltd. transformed into the dual main businesses of "cross-border e-commerce + home hardware", it had its performance highlights in 2019 and 2020. However , since the "Amazon account blocking wave " in 2021 , the company's revenue has dropped sharply, and its net profit has also suffered a large loss due to the provision of goodwill impairment.

* business Reputation : The profits and potential economic value that a business operation can bring in the future .

* Goodwill impairment : The reduction of assets and net profits of listed companies will drag down the current performance of listed companies and cause the stock price to continue to be sluggish.

* Goodwill impairment provision : refers to the amount of money that the acquirer of a company spends more than the company's market value, which is then offset from the company's profits, resulting in a decrease in the company's book profits .

According to Xinghui Co., Ltd. 's 2022 annual performance forecast , the company's revenue last year was 2.363 billion yuan, a year-on-year decrease of 35.43%, and a net loss of 230 million yuan . The reasons for the decline in performance are similar to those of other big sellers, all attributed to the epidemic, the Russia-Ukraine conflict and the Federal Reserve's interest rate hike. At the same time, affected by the wave of account bans, its e-commerce business sales revenue fell significantly year-on-year.

In the past few years , Xinghui's cross-border e-commerce business has been overly dependent on the Amazon platform, with revenue from the platform accounting for 90% at one point . But now, under the shadow of the account ban, although its revenue on Amazon still accounts for nearly half of the sector, it has dropped by 81.17% year-on-year in the first half of 2021 , while the proportion of other third-party platforms, self-operated platforms and offline channels is increasing significantly .

After the account closures, sellers were busy laying off employees, exploring new areas, and saving themselves to survive the industry's painful period. However, the top management of Xinghui shares seemed to ignore the damage to performance, and there were constant conflicts among the management. Some industry insiders said that this would cause Xinghui shares to sink deeper and deeper into the quagmire.

In 2018 , Xinghui Co., Ltd. acquired Shenzhen's well-known cross-border e-commerce company Zebao for 1.53 billion yuan, but the two companies began to get into disputes . Since 2020, arbitrations have continued between the founders. Zebao founder Sun Caijin sued the actual controller of Xinghui Co., Ltd., and Xinghui Co., Ltd. counter-sued Sun Caijin for violating regulations and causing the company's performance to plummet.

According to the announcement of Xinghui Shares, in November last year , the Guangdong Securities Regulatory Bureau took administrative supervision measures of issuing a warning letter to Xinghui Shares and its then chairman Cai Gengxi, general manager Chen Huiyin, and board secretary Lu Jinlian because Xinghui Shares disposed of a major transaction accounting for 15.34% of the company's net profit without the review of the board of directors and relevant disclosure .

This is not the first time that such punishment has been imposed. Since the second half of 2020 , in just two years, Xinghui Shares and Cai Gengxi have received as many as eight penalties from the China Securities Regulatory Commission and the exchange .

A group of senior executives are not fighting in the market, but are deeply trapped in their own crisis, and the future of Xinghui shares is slightly bleak. The financial report shows that as of the end of the third quarter of 2022, Xinghui shares' debt ratio was 85.4% , and the debt repayment pressure is still very high .

A stable and collaborative team can make a company's development more efficient, but the endless troubles among the senior management of Xinghui Co., Ltd. have brought many obstacles to the company's development. It is impossible to focus on developing performance and healing the pain of account suspension, and the revenue loss has become traceable.

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