E-commerce platform JD.com is facing scrutiny after suspected large-scale fraud has been uncovered involving Feixun (斐讯), a brand sold on JD’s platform. On June 10, a crowd of people that bought Feixun’s products gathered in front of the company’s headquarters in Beijing to protest the platform’s practice saying that they were “victims of P2P finance,” iFeng reports.
Shanghai Feixun Data Communication Technology produces TV boxes, smart bands, weight scales and other consumer electronics but its most popular product are routers. The company launched its “RMB 0” promotion in 2016: customers who purchased a Feixun product could receive a full refund by downloading financial app Lianbi Finance created by Shanghai Lianbi (联璧) Electronic Technology. Customers, however, were required to register their full name and bank account. On top of that, customers had to wait 1-12 months for a full refund. In the meantime, they also received offers for financial products such as loans.
In short, Feixun’s “RMB 0” deal was a gateway to selling P2P financial products. App users were offered to invest in financial products in order to get their refund faster or to buy other Feixun products using the same “RMB 0” deal. According to a Xinhua report, by June 30th, the platform registered 3973 investors with a total amount of capital reaching RMB 844 million.
Feixun started attracting attention at the beginning of this year over data privacy concerns. More recently, reports emerged that several app users found out that they cannot access their savings. On June 23, Shanghai police announced that it brought in 16 Lianbi employees for questioning.
JD released a statement on June 10 saying that they are only a sales platform for hardware products and that there has never been any form of cooperation with the financial platform related to Feixun. The company also said it will collaborate with relevant departments to solve user complaints and after-sale issues. At the same time, JD has prohibited any sort of “RMB 0” promotion and has promised to check marketing activities from other brands. It also removed Feixun’s products from its marketplace, as JD said in a statement for TechNode.
When the concern was brought to our attention we proactively removed the products in question from our site as a first step. The third party seller has said that it takes full responsibility for the situation. We will continue to monitor the situation closely and hope they quickly reach a resolution.
However, questions have arisen on the responsibility of JD to monitor the products on its platform. On June 20th, Feixun published on its WeChat and Weibo account that it reached RMB 700 million in sales. During three days in June, Feixun topped the list of brands in terms of sales in four categories: smart home, digital accessories, smart wearables, and speakers. According to a report from FT Chinese, 66% of Feixun’s products were sold through the JD platform while reports on Feixun’s possible risks have been circling since January. In April, the Shanghai Internet Financial Evaluation Center issued a note that Feixun’s “RMB 0” activities are suspected to be illegal fund-raising.
Unlike JD, its rival Taobao removed Feixun’s products from its e-commerce platform in 2017 over suspicions that the company was selling financial products in disguise which violates the platform’s rules, Xinhua reported.
This post was updated on July 16, 2018 at 4:00 PM to include a statement from JD.com.