(Yicai Global) Jan. 26 -- Six Chinese bicycle-sharing firms have closed lately and the unreturned user deposits they hold now top $152 million, data show. China’s consumers association (CCA) has called for a criminal probe into defunct Coolqi Beijing Technology Co. after complaints about the dockless bike company, which closed its refund channels in August and failed to give back hundreds of millions of yuan in deposits. CCA staff sent to its Beijing headquarters found the office empty, ditto a site in Chengdu in China’s southwestern Sichuan province that Coolqi said it had set up to refund deposits. The company misled hordes of users,100 of whom went to Chengdu to demand a refund in one day. CCA urges escrowing user deposits.
The industry holds more than $152 million in deposits from millions of users, which belong to users, and firms have no right to use the funds, the institution said. Guangdong’s consumer association attempted to sue bike sharer Xiaoming Bike, operated by Guangzhou Yueqi Information Technology Co. and demanded it return deposits immediately. The case was the first public-benefit suit filed in the bike-sharing sector. Most complaints against bike-sharing firms involve unrecovered deposits. “Appropriation of deposits has become a public secret widely known in the industry,” a bike-sharing insider said. These funds may go to bike production or company expenses. One bike-sharing firm borrowed $15 million with a $15 million deposit receipt,” one banking insider said. “$15 million was in the account, but the funds had already been loaned out.” Hellobike, run by Shanghai Junzheng Network Technology Co., is teaming up with Sesame Credit, the personal credit-rating agency run by e-commerce giant Alibaba Group allowing users with a good score deposit-free bike sharing in 10 Chinese cities.
CNY1.5 billion (USD227 million) worth of deposits have been withheld in China over the last six months, giving the bike-sharing biz a bad rap. China’s transport ministry and nine other agencies issued joint guidelines for bike-sharing firms in August. Deposits may not be used for any other purpose, per the new regulations. These rules are not binding, however. Bike-sharing is thus starting to look to many Chinese as an elaborate Ponzi scheme.