Shenzhen seller questioned for falsely disposing of 4.4 billion yuan of inventory

Global Easy Shopping falsely disposed of 4.424 billion yuan of inventory in 2020, and the former Shenzhen leading seller was again questioned by the Shenzhen Stock Exchange.

Global Easy Shopping falsely disposed of 4.4 billion yuan of inventory

Yesterday, *ST Cross-border disclosed an announcement stating that Cross-border Communication received an inquiry letter from the Shenzhen Stock Exchange regarding its 2020 annual report on May 16, 2021, and responded and announced it on June 2. It has now made supplementary responses to some of the inquiries at that time.

Cross-border Communication said that its subsidiary Global Easy Shopping falsely disposed of 4.424 billion yuan of inventory in 2020, including falsely increasing 2020 operating costs by 1.779 billion yuan and falsely writing off 2.645 billion yuan of inventory in 2020 (corresponding to 2.479 billion yuan of impairment provision). Global Easy Shopping did this in order to digest the falsely increased inventory.

It is understood that the Shenzhen Stock Exchange had previously issued an inquiry: Your company disposed of inventory with an original value of 2.645 billion yuan for which impairment had been recorded in the previous year , its subsidiary Hong Kong Global recorded commodity purchases of 630 million yuan after the period, and disposed of inventory of 1.779 billion yuan in other overseas warehouses. The company failed to provide the corresponding original vouchers and approval materials, and the accountants were unable to determine whether the inventory, accounts payable and main business costs were true and accurate.

In addition to mentioning the false disposal of inventory, Cross-Border Link’s response also mentioned other key issues.

In response to the failure to provide invoices and valid evidence in the annual audit, Cross-border Communication stated that the scale of Global Easy Shopping's financing was reduced in 2020. Affected by tight funds, promotion and logistics could not meet business requirements, resulting in a decline in revenue. The sluggish business led to a large number of employees leaving in search of better job opportunities. Because there was no consensus on severance pay and compensation, some personnel who were in contact with the finance department did not complete the handover procedures when they left, and the financial staff failed to obtain the accounting vouchers in a timely and complete manner, resulting in the failure to provide relevant original vouchers and approval materials as required by the annual audit accountant.

The inability to provide invoices is also related to the fact that the employees did not complete the handover procedures when they resigned. This shows the large number of employees who resigned. According to previous reports, the number of employees at Global Easybuy dropped from 3,353 to 885 in 2020, a reduction of 3/4. In August this year, a former employee of Global Easybuy revealed that the company issued a notice of holiday for some positions and listed a list of 151 people on holiday.

In the inquiry about logistics costs, Cross-Border Link verified the logistics costs and mentioned that the expenses of 129 million yuan incurred in 2020 were cross-period expenses, that is, the expenses that should have been attributed to 2019 were recorded in 2020, so the company reduced its sales expenses in 2020 by 129 million yuan.

(Image source: *ST Cross-border Announcement)

While the business scale is shrinking, Cross-border Communication has some other losses, which come from accounts receivable. In 2020, the company had accounts receivable of 82.65 million, corresponding to the following customers:

(Image source: *ST Cross-border Announcement)

In response to the Shenzhen Stock Exchange's question of whether these receivables involved fictitious transactions or fictitious income, Cross-Border Link stated that approximately RMB 36.25 million of the above receivables were commissions and fees that had already been deducted by overseas payment platforms, and the remaining approximately RMB 46.41 million was affected by the seizure of Chinese sellers' accounts by overseas websites such as Amazon. After the company's seller accounts were sealed, the funds in the sealed accounts were not expected to be recovered .

Due to poor management, Cross-border Link has suffered heavy losses in recent years, with a loss of about 2.7 billion yuan in 2019 and a loss of 3.374 billion yuan in 2020. Among them, the main source of revenue, Global Easy Shopping, lost as much as 2.95 billion yuan. In the past two years, Global Easy Shopping's revenue has fallen sharply, from 8.506 billion yuan in 2019 to 5.629 billion yuan in 2020.

After *ST Cross-border disclosed that its subsidiary Global Easybuy had falsely disposed of 4.424 billion yuan of inventory, the Shenzhen Stock Exchange sent another inquiry letter, asking *ST Cross-border to explain in detail the specific year and corresponding amount of Global Easybuy's false transfer of current accounts into inventory of 4.424 billion yuan, and the specific year and corresponding amount of impairment provision that should be fully provided in the corresponding year. The Shenzhen Stock Exchange pointed out that *ST Cross-border should make a written explanation on the above issues, and the relevant accounting firms should carefully check and express clear opinions, and submit the relevant explanatory materials to the Shenzhen Stock Exchange and disclose them to the public before December 31, 2021.

While GlobalEasy's internal problems have attracted attention, there has also been some new progress on its supplier debt issue.

During bankruptcy liquidation, the court notified Global Easy Shopping to declare debts

Due to debt problems, Global Easy Shopping was frequently sued. In June, the big seller was filed for bankruptcy, which sparked heated discussions in the industry. However, due to insufficient evidence, the bankruptcy application was not accepted at that time.

On November 24, Shenzhen Zhongan Xunshi Technology Co., Ltd. applied to the Taiyuan Intermediate People's Court of Shanxi Province for bankruptcy liquidation of Shenzhen Global Easybuy on the grounds that it could not repay its due debts and obviously lacked the ability to repay. In the end, the Taiyuan Intermediate People's Court ruled to accept Zhongan Xunshi's bankruptcy liquidation application against Shenzhen Global. Subsequently, the Taiyuan Intermediate Court issued a "Civil Ruling" and ruled to seal up all the properties of Shenzhen Global.

The bankruptcy of Global Easy Shopping was settled, but it attracted an inquiry letter from the Shenzhen Stock Exchange. The parent company, Cross-border Communication, was asked to explain the compliance of losing control of Global Easy Shopping and no longer being included in the scope of consolidation, whether it would have a substantial impact on the elimination of the matters that the company could not express an opinion on in its annual report, and to provide additional information on the reasons for not disclosing information on Global Easy Shopping's application for bankruptcy liquidation in a timely manner.

Soon, Cross-Border Link gave a satisfactory response.

On December 11, Cross-Border Link released an announcement on the progress of Global Easybuy's bankruptcy liquidation, stating that Shenzhen Global's administrator Shanxi Guojin Law Firm has completed the handover of Shenzhen Global's official seal, licenses, account books and other information, and has taken over the management of Shenzhen Global's various assets and businesses. The company has lost control of Shenzhen Global, and Shenzhen Global will no longer be included in the company's consolidated financial statements.

The bankruptcy of Global Easy Shopping has made a number of suppliers who are demanding payment for their goods unable to hold back. According to the bankruptcy liquidation order ( 1. Wages and labor insurance expenses owed to employees by the bankrupt enterprise; 2. Taxes owed by the bankrupt enterprise; 3. Bankruptcy claims), Global Easy Shopping, which is heavily in debt, may not be able to pay its suppliers after the bankruptcy liquidation is completed.

In fact, on December 10, the Taiyuan Intermediate People's Court issued a notice, informing the units that received the notice to declare their debts to Global Easy Shopping's administrator, Shanxi Guojin Law Firm, within 30 days, stating in writing the amount of the debt, whether there is any property guarantee, and whether it is a joint and several debt, and provide relevant evidence materials.

If the claim is not declared within the time limit, it can be supplemented before the final distribution of the bankruptcy property, but the distribution that has been made before will not be supplemented for the non-declarer, and the expenses incurred for reviewing and confirming the supplementary claim will also be borne by the non-declarer. If the claim is not declared, the rights shall not be exercised in accordance with the procedures prescribed in the Enterprise Bankruptcy Law of the People's Republic of China.

According to the notice, the Taiyuan Intermediate People's Court is scheduled to hold the first creditors' meeting in its No. 1 Court at 9:00 a.m. on March 30, 2022. Units that receive the notice have the right to participate after declaring their claims.

Half a month after the notice was issued, a large number of suppliers still had not received the news. In a rights protection group, a supplier took out the notice, and most of the more than 200 suppliers in the group said they had not received this important notice.

After contacting the administrator's law firm, the supplier joined a creditor group, where a group announcement prompted the download of a debt declaration form, which included "Notices on Debt Declaration in the Global Easy Shopping Bankruptcy Case" and an electronic version of the notice from the Taiyuan Intermediate Court. Although the hope of getting the money was slim, many suppliers were still trying their best to fill it out, as it might be their last chance of survival.

Global Shopping

Shenzhen big seller

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