One of the branches extended from the 30 billion yuan Chengxing case has recently come to an end.
On April 30, 2024, the Shanghai Financial Court made a judgment on the case of Shanghai Gefei Asset Management and Shanghai Ziyan Car Rental under Noah Holdings v. JD, rejecting all plaintiff's claims against JD and clearly stating that JD has no responsibility in this matter.
Regarding this result, several investors of Gefei's Chengxing case products told Nandu reporters, "This result is expected. We all know that JD.com is not responsible, and they (Gefei) are just delaying time."
The reporter also learned that in the next month, multiple arbitration cases filed by investors against Gefei will be held one after another.
The "Chengxing Series" fraud case involved Noah and Gefei stepping on mines for 3.4 billion yuan
The Chengxing case, also known as the Luo Jing case, is the actual controller of Guangdong Chengxing Holdings Group (hereinafter referred to as "Chengxing Holdings").
The matter needs to be traced back nine years ago.
From 2015 to 2019, companies mainly controlled by Chengxing Holdings fraudulently obtained over 30 billion yuan from institutions such as Xiangcai Securities, Moshan Factoring, Gefei Asset Management, Yunnan Trust, Anhui Zhongxin, etc. through fictitious supply chain trade with Suning and JD.com, resulting in a loss of over 8 billion yuan. Among them, Noah's controlling stake (6686. HK) and its subsidiaries involved an amount of approximately 3.4 billion yuan, which came from the "Genesis Core Enterprise Series Private Equity Fund" initiated by Shanghai Gefei Asset Management Co., Ltd. (hereinafter referred to as "Gefei Asset Management"), as well as Noah (Shanghai) Financial Leasing Co., Ltd. (now "Shanghai Self proclaimed Automobile Leasing Service Co., Ltd.").
The details of the "Chengxing case" and the "Second instance Criminal Judgment" of the Shanghai Higher People's Court and the "First instance Criminal Judgment" of the Shanghai Second Intermediate People's Court have been disclosed in detail.
For example, in the process of cooperating with Noah based companies, Chengxing first provided false purchase and sales contracts and other financing materials, fabricated accounts receivable claims against JD and Suning, and provided the names of JD's real employees and the mobile phone numbers of Chengxing based company employees for communication. Then, in a timely manner, intercept the express materials sent by the financing institution to JD, such as the confirmation letter of debt transfer, and stamp the materials with the privately carved JD company seal before sending them back to the financing institution in the name of a JD employee. Simultaneously forging JD employee identification cards, obtaining invitation codes for reasons such as "feeling the 618 atmosphere", entering JD's office area to conduct due diligence interviews, hand over materials, and sign contracts in person.
In addition, Chengxing Company also produces and displays false JD VC systems, provides false business data and other materials, opens third-party online stores on JD's website, and self purchases and self sells to inflate sales revenue, resulting in the illusion of JD Company receiving payments; Opening counterfeit JD accounts for payment collection, etc.
In order to better achieve its goals, starting from September 2016, Chengxing Group Company has provided a total of over HKD 3 million, equivalent to over RMB 2 million, to Fang Jianhua, a staff member responsible for contacting Chengxing Group Company under Noah Zhengxing Fund Sales Co., Ltd.
Fang Jianhua is also the Product Director of Gefei Asset Management, who has helped accelerate the handling of operational business between Chengxing Company and Noah, agreed to change the confirmation method, and notified Chengxing Company in advance to prepare for due diligence. Product due diligence is also largely led by Fang Jianhua.
JD was found to be irresponsible and all charges were dismissed
From the details disclosed in the above judgment, it can be seen that the success of Chengxing's fraud against Noah's company is due to the meticulous trap design and the assistance of Noah and Gefei's "insiders".
Noah quickly pointed his finger at JD.com. In July 2019, Noah Holdings stated in a related statement that "Chengxing International is a supplier to JD, and there are many long-term transactions between the two parties", and "Gefei has filed a judicial lawsuit against Chengxing and JD regarding supply chain financing.". Noah's actual controller Wang Jingbo also emphasized in an internal letter that "the investment target of the fund is mainly to provide supply chain financing for accounts receivable and debt between Chengxing and JD.".
Southern Metropolis Daily learned that Noah's Gefei Asset Management and Self proclaimed Leasing companies have filed lawsuits against JD.com, demanding JD.com to repay losses of 3.415 billion yuan and 85 million yuan, as well as corresponding litigation costs.
However, after two public hearings on March 29, 2023 and November 24, 2023, the lawsuit requests of Noah Group Company against JD were all rejected, and the Shanghai Financial Court determined that JD was not responsible.
Specifically, Noah's request for JD to assume liability for infringement damages was not accepted by the Shanghai Financial Court, as they provided five reasons: employee management, office space management, email sending and receiving mechanism, financial invoice management, and POP business management.
Firstly, employee management.
The court believes that JD employees were unable to foresee the criminal behavior of Chengxing Group Company, and there is no causal relationship with the losses of Gefei Asset Management and self leasing. And employees who have not obtained authorization or instructions from JD are not performing work tasks, which does not constitute a duty behavior.
Therefore, the court does not support the infringement liability of Gefei Asset Management and Self proclaimed Leasing claiming that they were defrauded due to their trust in JD's venue management and violated their duty of care for employee management.
Secondly, office space management.
The court believes that JD.com does not have a legal security obligation. JD has fulfilled its duty of care by implementing a reservation code system for office space management.
At the same time, considering the size of JD's office space and its large number of visitors and commercial needs, it is not realistic or necessary to require JD to strictly supervise and control all activities of all personnel entering the JD building. There is no contract, negotiation or other transaction relationship between JD and Gefei Asset Management or Self proclaimed Leasing, and JD has no way to foresee and prevent Gefei Asset Management and Self proclaimed Leasing from being defrauded by Chengxing related companies.
Therefore, the court does not support the claims of Gefei Asset Management and Self proclaimed Leasing that they were defrauded due to their trust in JD's venue management.
Thirdly, email sending and receiving mechanism, financial invoice management, and POP business management.
The court believes that there is no situation where JD failed to fulfill its duty of care, resulting in losses to Gefei Asset Management and self proclaimed leasing.
The express delivery services provided by Gefei Asset Management and self leasing were intercepted by Chengxing Company before entering JD's file sending and receiving system, and the corresponding express delivery services have exceeded JD's control range; JD has no duty of care to prevent others from issuing false value-added tax invoices through the use of tax management information systems; JD cannot foresee that Chengxing Group companies will use relevant transaction models to engage in contract fraud, and there is no causal relationship between the losses of Gefei Asset Management and self leasing and JD's management of its business.
Simply put, the Shanghai Financial Court considers all the litigation claims of Noah Group companies against JD.com to be unfounded and does not support them.
On May 8th, Noah Holdings also announced that the company received a civil judgment from Chengxing on May 6th. The Shanghai Financial Court supported Gefei Asset's lawsuit against Chengxing, while other claims against the co defendant (i.e. "JD") were dismissed.
Add more cases of supply chain finance disputes and play a demonstrative and early warning role
In fact, the Shanghai Financial Court has tried a similar case before.
In 2017, Zhibao forged the "Big Order Purchase Contract" and "Confirmation of Notice of Creditor's Rights Transfer of Accounts Receivable" with Suning Yigou, and used them to defraud Khorgos Xinjun Commercial Factoring Co., Ltd. (hereinafter referred to as "Xinjun Factoring"). After the incident, the factoring company also filed a lawsuit against the large e-commerce platform involved, demanding corresponding debts.
The court believes that as a professional factoring firm, Xinjun Factoring should verify the authenticity of the contract and accounts receivable claims when conducting factoring business. Xinjun Factoring only used the "Big Order Procurement Contract" provided by Zhibao Company and the contact information of "Suning staff" as the basis for verification, and did not contact Suning through independent public channels. It did not find any false Suning contract special seal in the basic contract and "Confirmation of Accounts Receivable Debt Transfer Notice".
Moreover, the authenticity of accounts receivable is a prerequisite for the signing of factoring contracts. When there are fictitious accounts receivable claims, it is necessary to examine whether the accounts receivable creditors and debtors constitute a joint fictitious agreement. If the creditor unilaterally fabricates the accounts receivable claim, the debtor shall not be liable under the factoring contract.
Therefore, the Shanghai Financial Court did not support Xinjun Factoring's claim against Suning.
It is worth mentioning that this case has been successfully selected as a typical case of Shanghai Court's service guarantee for the integrated development of the Yangtze River Economic Belt and the Yangtze River Delta region, as well as the fifth batch of typical cases of Shanghai Court's legal guarantee for the healthy development of private enterprises.
The Shanghai High People's Court has evaluated that supply chain finance, as an emerging financing method, has multiple business links, multiple participants, and a long financing chain, and the risks involved cannot be ignored.
The handling of this case by the Shanghai Financial Court has played a positive role in alerting local financial organizations to risks, effectively protecting the property safety of leading enterprises in the supply chain of the Yangtze River Delta, reflecting the promotion of financial justice to serve the development of the real economy, and also providing judicial protection for preventing and resolving financial risks in the Yangtze River Delta. The use of judicial entity judgments has played a demonstrative role in typified litigation, providing judicial guidance for all parties to adjust transaction patterns in a timely manner and set reasonable loss reduction strategies.
From this perspective, the lawsuits and judgments between Gefei Asset Management, Self proclaimed Leasing, and JD are expected to become new typical cases, providing demonstration, warning, and guidance for similar events, and further promoting the optimization of the business environment in the Yangtze River Delta.
Investors defend their rights for five years, waiting for arbitration in court
Regarding the progress of the Noah v. JD.com case, some investors stated, "We knew from the beginning that JD.com was not responsible, and they (Noah) were technically delaying time and trying to make us lose our temper." The investor also revealed, "Noah's financial advisors have been using stock options to persuade us to settle."
The so-called stock plan refers to the settlement method proposed by Noah Holdings shortly after the outbreak of the Chengxing case. Specifically, investors can obtain restricted stocks corresponding to Noah Holdings at around $49 per share based on their investment amount, which will gradually be lifted from restrictions within ten years. Investors who accept the settlement need to abandon all claims against Noah Holdings and related parties.
According to the annual report of Noah Holdings, as of the end of 2023, out of a total of 818 investors, 223 have not yet accepted settlement, with a corresponding amount of approximately 800 million yuan. As of the close on May 8, 2024, the stock price of Noah Holdings (Noah Wealth) was only $14.29 per share.
In December 2023, dozens of investors went to Noah Holdings Shanghai headquarters to demand an explanation, but to no avail.
At the Oriental Wealth Noah Holdings, an investor left a message saying, "After the fund exploded, Noah Wealth did not protect the interests of investors, but ignored their right to know and legal recourse. For more than four years, they deprived investors of their right to sue on the grounds that the criminal case had not ended."
On January 5, 2024, the final ruling of the "Chengxing case" was made, and in mid to late May, several arbitration cases against Gefei Asset Management by investors will be heard one after another.