(Yicai) May 10 -- Classes and job vacancies advertised by Space in the five days before the upmarket Chinese gym chain suddenly closed may have been fraudulent, according to a lawyer.

A company is unlikely to decide to go into liquidation in a very short period of time, said Zhao Zhanzhan of Beijing Jia Lawyer. If Space was still selling classes while deciding to enter liquidation, that could constitute fraud, Zhao pointed out.

SpaceCycle, the gym chain’s operator, announced on April 30 that it could no longer continue to run the venues, adding that the Beijing-based company would resolve its remaining debt problems in accordance with the law to protect the interests of its creditors.

Space did not refund any fees to its members before closing, Yicai learned. In addition, it made job postings and offered course discounts on its WeChat account on April 25.

Established in 2015 by former Sony Music Entertainment executive Matthew Allison, Space focused on “music plus fitness” classes. Its three outlets in Beijing, four in Shanghai, and one in Hangzhou were all located in key business districts and targeted well-heeled white-collar workers.

In 2018, Space secured CNY100 million (USD13.8 million) in a fundraiser led by Chinese e-commerce giant Alibaba Group Holding, with Hong Kong actor Daniel Wu also investing.

Many gym chains in China have closed as a result of the Covid-19 pandemic. Industry leader Tera Wellness and Physical was rumored to have suffered a broken capital chain last May, with its outlets shutting one after the other. Physical also closed its gyms in Shanghai, Guangzhou, and Chengdu at the end of last year.

Since gyms generally operate on a membership prepay model, closures often lead to paid-up clients losing out.

The authorities need to set up an insurance system that obliges businesses to take out policies covering prepaid cards in case customers need to claim compensation when a gym goes bankrupt, according to Lai Yang, a member of the China General Chamber of Commerce's expert committee.

Editors: Dou Shicong, Martin Kadiev