Zhou Hang, founder and CEO of ride-hailing service Yidao Yongche (易到 in Chinese), admitted yesterday in a statement that the firm has cash problems. He blames this on its controlling shareholder LeEco diverting to other purposes an RMB 1.3 billion fund originally earmarked for the firm, our sister site TechNode Chinese is reporting.

Zhou made the statement in response to a stream of negative publicity about the firm’s troubled operations recently.

Rants and complaints against the ride-hailing service have kept growing over the past few months. Drivers of the ride-hailing service feel aggrieved for being unable to receive their payments from the car-hailing platform, while passengers grumbled that there are often no cars available even if they opt to pay higher fees for their trips, and found it difficult to have their prepaid funds refunded.

Yidao was the runner-up with a mere 3.6% share in the ride-hailing market last year  (in Chinese) dwarfed by the 94.6% share of marker leader Didi Chuxing (滴滴出行 in Chinese).

To fend off intense competition from rivals and expand its own presence, Yidao had to resort to a strategic investment from outside investors to fund its subsidy campaigns, a common practice seen in the car-hailing market in the past few years. In October 2015, internet giant LeEco’s automobile unit LeSEE bought a 70% stake in the firm, becoming its controlling shareholder.

As of the end of last June, the firm had attracted a whopping RMB 6 billion in deposits from 6.53 million customers in its 227-day 100%-rebate campaign (in Chinese).

Yet the high subsidies offered to drivers and customers have led to a strain on the cash flow of the firm, and the situation has gotten even worse when its majority shareholder LeEco itself has faced a big cash flow squeeze since last year suffering from excessive expansion.

There have been reports that LeEco delayed payroll for its U.S. employees this month and scrapped its planned US$2 billion acquisition of U.S television maker Vizio Inc, signs that the technology giant has been embroiled in a cash crunch.

Although LeEco has recently managed to secure an RMB 15 billion funding program from real estate titan Sunac, it seems the beleaguered internet titan still has trouble getting their arms around the mess of the car-hailing service.

What Yidao is facing is not a mere creditor’s rights dispute, but may be a mass incident hampering social stability, Zhou warned.

Zhou has gradually faded out from the management since the firm was controlled by LeEco and recently rumored to have left the firm to Shunwei Capital, a VC firm set up by Xiaomi co-founder Lei Jun.

In response to Zhou’s statement, Yidao and LeEco have refuted the cash diversion charges in a joint statement last night and said they have injected roughly RMB 4 billion in the car-hailing platform to bolster the firm’s development.

According to LeEco, the RMB 1.3 billion in debate is part of an RMB 1.4 billion syndicated loan to Yidao, which LeEco pledged its real estate LeEco Mansion as collateral. The parties have agreed to use the loan for daily capital turnover of LeSEE and Yidao. Of the total amount, RMB 100 million will use to fund Yidao’s  business, while the balance goes to LeSEE. LeEeo considers Zhou’s remarks to be a smear, as Zhou has had knowledge of the matter, and signed up to the contract.

While the loan specifics remain to be confirmed from banks, an industry observer advised that LeEco should act swiftly to head off the war of words and help Yidao out, whether through new external financing or its own capital injection.