The funds involved exceeded 21 million, and Zebao was sued again

The funds involved exceeded 21 million, and Zebao was sued again

A top-selling product is also a lot of lawsuits.

 

Cross-border business involves multiple links such as supply, sales, and payment collection, and one careless move may lead to disputes. From November to December 2023, Xinghui Co., Ltd. added three lawsuits, and Zebao stood in the dock three times due to sales contract issues. At the same time, a lawsuit by Tongtuo made progress and recovered 760,000 US dollars in store payments, but most of the funds have not been recovered. Selling overseas in large quantities is also dangerous.

 

Zebao was sued three times, and Xinghui shares had an additional 21 million lawsuits

 

Recently, Zebao's parent company, Xinghui Co., Ltd., issued an announcement that the company has been involved in three new lawsuits since November 2023 , involving funds of up to 21.0585 million yuan. Zebao has become the defendant three times, all due to sales contract disputes.

 

Among them , in November 2023, Foshan Ruiyan Daily Necessities Co., Ltd. sued Shenzhen Linyoutong, Hangzhou Zebao, Shenzhen Danya, Zebao Technology, and Shenzhen Ruimi due to a sales contract dispute, with the amount involved being 1.0492 million yuan;

 

Also in November, Guangdong Kegao Electric Co., Ltd. sued Shenzhen Linyoutong, Shenzhen Danya, Hangzhou Zebao, Zebao Technology, Lin Zhenqing , He Peng, Shenzhen Ruimi, Xinghui Shares, and He Jianfeng , also due to a sales contract dispute, with the amount involved reaching 7.4736 million yuan;

 

In December 2023 , Dongguan Zhifeng Electronics Co., Ltd. sued Shenzhen Linyoutong, SKL, Zebao Technology, Hangzhou Zebao, Xinghui Co., Ltd., and Shenzhen Danya . The case was a sales contract dispute with the amount involved reaching 11.7871 million yuan.

 

Qichacha shows that Zebao Technology has experienced abnormal operations. On November 24, 2023, because it could not be contacted through the registered residence or business premises, the Longhua Bureau of the Shenzhen Municipal Market Supervision Administration listed it as an enterprise with abnormal operations.

 

In the past one or two years, Zebao has been involved in lawsuits almost continuously. In the wave of Amazon's account suspension, a total of 367 of its sites were closed, and the balance of frozen funds was equivalent to about RMB 32.2301 million. In October 2022, Zebao's US subsidiary Sunvalleytek International, Inc. filed a lawsuit against Amazon on the grounds that its store account was frozen, but the case did not make significant progress.

 

Because of the impact of the account blocking incident, Zebao and its parent company sued the original founder of Zebao and related transaction parties to court, demanding that they return the 1 billion transaction price, causing an uproar in the industry.

 

External disputes are also accumulating. As of February 16, 2023 , in addition to the disclosed litigation matters, the cumulative litigation and arbitration matters of Xinghui Co., Ltd. and its subsidiaries for twelve consecutive months involved a total amount of approximately RMB 46.7968 million, accounting for 10.09% of its latest audited net assets.

 

Compared with Zebao, the situation of Damaitongtuo is not optimistic either.

 

Tongtuo’s USD 2 million payment has not been recovered

 

In the past three years, Tongtuo Technology has encountered a wave of Amazon account blocking, Walmart store payment collection, and Paypal account deductions and transfers. The former billion-dollar sales volume has continued to shrink. Finally, at the end of 2023, its parent company announced in a contract that it would transfer Tongtuo to Huakai Yibai. Only six years after being acquired, this "Four Young Masters of South China City" is facing a change of ownership, which makes the industry very emotional.

 

Recently, Tongtuo has made progress in collecting payments from its Walmart stores.

 

In order to expand its business on Walmart, Tongtuo registered a company in the United States and opened a platform store. At the end of 2021, Tongtuo Technology suddenly discovered that the relevant collection account of the Walmart store Sports Station could not be repaid normally, and it was suspected that it had been changed or transferred by an overseas principal. Tongtuo and its seven subsidiaries established in Colorado, USA , filed a lawsuit in the Illinois State Court, requesting that the defendant Xie Dan repay approximately US$2.786 million.

 

According to the news released last week, after many negotiations, Tongtuo received about 760,000 US dollars returned by the defendant Xie Dan. The Illinois court also ruled on the case, as follows:

 

In view of the fact that the defendant has previously returned US$759,870, the defendant Xie Dan was ordered to pay compensation of US$2,026,255; Xie Dan was required to cooperate in providing property to fulfill the judgment; Xie Dan was permanently prohibited from using any information of Tongtuo Technology; and the proceeds of account 000000717150855 opened by Xie Dan in the name of Jona Thee Inc. at Morgan Bank, at least approximately US$226,812.04, were transferred to Tongtuo Technology’s American lawyers to be returned to Tongtuo Technology and used for the pending judgment against the defendant Xie Dan.

 

But even with this funding, Tongtuo still faces a gap of approximately US$2 million in store payments.

 

Tongtuo has suffered several severe shocks in almost one year: in the wave of Amazon account blocking, Tongtuo Technology was banned from selling and closing 54 stores, suspected of freezing funds of 41.43 million yuan, accounting for 4.27% of the company's monetary funds at the end of 2020; Walmart store payment abnormalities involved about 2.786 million US dollars, and most of them have not been recovered so far; as of October last year, 49 PayPal accounts bundled with Tongtuo's independent station were deducted, with a total amount of 69.0252 million yuan . For Tongtuo, this is a series of heavy blows one after another, and with the sharp reduction in Amazon's business, Tongtuo has difficulty recovering.

 

In 2017, Tongtuo Technology was acquired by Huading Shares at an extremely high valuation of US$2.9 billion. According to the gambling agreement with Huading Shares, Tongtuo Technology must achieve net profits of no less than RMB 200 million, RMB 280 million, and RMB 392 million in the performance commitment period in 2017, 2018, and 2019, respectively. However, Tongtuo Technology only met the gambling requirements in the first year, and failed in the remaining two years. According to the agreement, the listed company repurchased a total of 37,328,847 shares of the company's shares from the performance commitment party at a total price of RMB 1.

 

After Tongtuo was acquired, there were major changes in internal executives, and unstable performance may be one of the reasons for the failure of the bet. Then came the account blocking wave in 2021 and the subsequent PayPal deduction storm, and Tongtuo fell into a deep quagmire.

 

However, Tongtuo is trying its best to adjust its steps. In 2023, Tongtuo officially launched a three-year strategic plan to develop in the direction of "fine stores and brands". At present, the growth of some core categories is strong and powerful; this year, the full-hosting model is rampant, and Tongtuo has tried the full-hosting model on the AliExpress platform to find new growth points.

 

In the first half of this year, Tongtuo's business finally turned losses into profits, achieving revenue of 1.676 billion yuan and net profit of 3.5078 million yuan . Although the scale is far behind the past, it has finally returned to the growth line.

 

In early December, Tongtuo's parent company Huading Co., Ltd. signed an agreement with Huakai Yibai , whereby Huakai Yibai intends to acquire 100% of Tongtuo Technology's equity held by Huading Co., Ltd. and all operating assets related to its main business in cash , including but not limited to trademarks, patents, stores, inventory assets, etc. Huakai Yibai will pay a lump sum of 100 million yuan in earnest money to the co-managed account opened by Yiwu Huading Nylon Co., Ltd. within five working days after the signing and effectiveness of the Cooperation Framework Agreement .

 

Huading Holdings sold Tongtuo six years after acquiring it, which inevitably puts Tongtuo in an awkward position. On the other hand , Huakai Yibai's performance has been rising steadily since Yibai Network entered the market. With the help of Yibai Network, a top seller, Tongtuo is expected to see a faster recovery in performance. The layout of the two parties in different categories, channels and supply chains can also complement each other.

 

Even if you become a top seller, it is inevitable that there will be major changes in performance development. Taking this as a mirror, cross-border sellers should pay more attention to compliance operations and multi-channel layout to reasonably hedge risks in their operations. The year 2024, which has already arrived, will still be a big challenge.


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