Tencent Co-Founder Says LeEco Is 'Obviously A Ponzi Scheme'

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Tencent Holdings co-founder Zeng Liqing described LeEco as being "obviously a Ponzi scheme" in a social media post published on WeChat over the weekend. The post was highly critical of the struggling Chinese tech giant and was later "liked" by Tencent Chairman Pony Ma Huating and Xu Xiaoping, one of the largest angel investors in the Far Eastern country. Zeng didn't stop at labeling LeEco as a fraudulent investment operation, with Tencent's advisor emeritus stating that anyone who doesn't recognize that the firm is a Ponzi scheme shouldn't be an entrepreneur of any kind.

A spokesperson for the Beijing, China-based original equipment manufacturer (OEM) refused to comment on Zeng's statement as the firm likely has more pressing issues to deal with at the moment. LeEco has been trying to endure a major cash crunch in recent months and was forced to liquidate a number of its high-value assets, including a Silicon Valley property it purchased from Yahoo last year. Most industry watchers agree that the Chinese tech giant expanded too aggressively in recent years, simultaneously investing in too many experimental ventures that may not turn a profit for years to come. That business strategy led the firm to where it is today, struggling to raise capital and keep its numerous businesses afloat. LeEco had some success with seeking financial injections in recent months, though only in the context of saving its relatively promising entertainment division, whereas many of its moonshot projects like the company's self-driving venture are still in danger of being shut down.

The firm that originally started as a Netflix-like online video service in China started its massive expansion efforts circa 2012, with all of its new businesses being backed by heavy loans, many of which are now due to be paid back. This business strategy is precisely what Zeng criticized in the aforementioned post, implying that LeEco was only able to pay back its previous loans by taking out new, larger ones. That approach is unlikely to work in the long term as the company's financial struggles have now been well-documented and will presumably discourage any new major investors from betting on it to bounce back.

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