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article imageChina's LeEco put under pressure as co-founder's assets frozen

By James Walker     Jul 4, 2017 in Technology
LeEco has said its ongoing financial crisis is "far worse than expected" and it is still rapidly running out of cash. Its billionaire co-founder resigned today, hours after having his personal bank accounts and assets frozen due to outstanding debt.
LeEco was founded in 2004 and quickly rose to fame as the "Netflix of China." Its streaming service proved popular with consumers in its home market, giving it access to investment to build a fledgling hardware businesses.
In the less than fifteen years since, LeEco has expanded into a collection of businesses with a diversity that exceeds Western tech firms. The company makes and sells smartphones, VR headsets, its own range of smart home products and even an electric car.
Its unprecedented rate of growth has now caught up with it and LeEco is facing severe financial difficulties. It is being forced to consolidate many of its businesses as its early supplies of money run dry.
Last week, the company's chairman Jia Yueting admitted the cash constraints are "far worse than expected." LeEco is so severely burdened by debt that it's failing to operate at full capacity. The company has received several rounds of investment including aid packages from other tech firms. Even the 15 billion yuan ($2.2 billion) granted by a Chinese property developer has failed to resolve the situation.
Today, Yueting left the company after a Shanghai court froze personal assets estimated to be worth $183 million. Coming mere days after Yueting confirmed LeEco still can't make ends meet, the development is another significant setback for the company.
According to Reuters, the assets were frozen after LeEco failed to repay a bank it borrowed from. The money was used to fund LeEco's smartphone business. A LeEco spokesperson said the company is in "close communication" with the bank. He added that LeEco plans to raise even more cash so it can "get back to normal."
While there's still some optimism within the company, outside investors are now increasingly sceptical of LeEco and its wild ambitions. LeEco had planned an aggressive expansion into the U.S. but is now being forced back out of the market. A $2 billion deal to buy U.S. TV brand Vizio was called off earlier this year after facing "regulatory headwinds."
In 2016, LeEco launched its first smartphone in the U.S. and said it would bring an entire ecosystem of devices in the market. Intending to set up as a rival to Apple and Google's all-in-one platforms, the company exuded confidence that has since disappeared. By the fall, LeEco had been forced to start selling its $250 million plot of land in Silicon Valley.
Investors and business partners are now lining up to reclaim their funds from LeEco. The asset freeze has been welcomed by firms that have dealings with LeEco yet to be resolved. One U.S.-based marketing firm told the BBC it's still owed $100,000 by the company. With LeEco's money still pouring away, the tech giant's one-time success as the "Netflix of China" is beginning to fade into the past.
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