2024.10.31

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Introduction: According to Yitan Technology, the company is currently facing operational stagnation, struggling, and on the brink of collapse.

In autumn in Shanghai, there is already a chill in the air. The building at No. 1 Caosong Road, Xinqiao Town, Songjiang District, is the headquarters of Shanghai Yitan Network Technology Co., Ltd. (hereinafter referred to as "Yitan Technology"), a local "star" internet company. This is a technology company focused on the esports and esports social ecosystem, which has now become embroiled in a cross-provincial law enforcement case.

First Financial has learned that due to "suspected involvement in operating a gambling house," the Taoyuan County police in Changde City, Hunan Province, conducted an inter-provincial law enforcement action against Yitan Technology. The police detained several employees of the company and froze over 100 million yuan in funds. According to Yitan Technology, the company's operations have come to a standstill, facing severe difficulties and the brink of collapse.

Regarding the case mentioned by Yitan Technology, in this month, a reporter from First Financial Daily sent a letter to the Publicity Department of Taoyuan County Committee. Subsequently, a responsible person from the department forwarded a reply letter from Taoyuan County Public Security Bureau stating: "The case is still under investigation, and our bureau is temporarily not accepting related interviews." On the 10th, the reporter from First Financial Daily made multiple attempts to contact the Publicity Department of Taoyuan County Committee via phone and SMS to inquire about the latest developments in the case, but as of the time of publication, no response was received.

The incident dates back to a year ago. On a specific date, Yitan Technology discovered that its bank account had been frozen for 10 million yuan, with the freezing party being the Taoyuan County Public Security Bureau of Changde City, Hunan Province. According to Yitan Technology's self-report, the company learned that the reason for the freeze was that Yuan, suspected of embezzlement, had used the involved funds to recharge and reward consumption on the live streaming platform operated by Yitan Technology. The company subsequently communicated with the Taoyuan police, expressing willingness to visit the local area for face-to-face discussions, and the Taoyuan police indicated that they would later come to verify the data.

Yitan Technology is a subsidiary of the Play Out Dreams Group, which also owns independent subsidiaries such as Yitan Technology, Wangyu Internet Café, and others. Yitan Technology primarily focuses on esports coaching and online entertainment community services, operating online platforms including the leading esports coaching platform Bixin and Yu'er Voice.

Yitan Technology's Self-Statement: On the afternoon of a certain date, the Taoyuan police entered the company, "detained three employees on the spot, later took into custody three more employees outside the company, and issued online warrants for the arrest of two other employees," with the case being that the company was suspected of operating a gambling house. On the same day, the police froze the funds of the Wanchu Dream system accounts, including Yitan Technology, amounting to 100 million yuan, and seized company computers and other assets.

In a letter of reply to an employee of Yitan Technology regarding a complaint, Taoyuan County Public Security Bureau introduced the details of the case: In [month], [year], while handling a case, Taoyuan County Public Security Bureau discovered that the suspect had transferred over ten million yuan through WeChat and Alipay to Yitan Technology, which was then used to participate in lottery gambling in modules such as "Mengmeng Paradise," "Silk Road," and "Zhuguang Zodiac Lantern" within "Bixin" and "Yu'er," with a total gambling amount reaching over ten million yuan. Through preliminary investigation, the公安机关found that "Bixin" had aggressively recruited guilds for cooperation, using anchors to attract players to download and register, inviting gamblers to participate in gambling, with the company and guilds taking a fixed percentage of the proceeds and offering rebates, amounting to a significant sum, which met the criteria for the crime of operating a gambling house and was suspected of the crime of operating a gambling house. "After obtaining approval through successive reports, our bureau filed a case for the 'Yu'er and Bixin platform operating a gambling house' on [date], [year]."

Currently, our public security organs have already taken criminal legal measures against the relevant involved personnel and property, and are further collecting relevant evidence in accordance with the law... The Taoyuan County Public Security Bureau will expedite and conclude the entire case in accordance with the law.

YiTan Technology stated that on the dates of [Month] [Day] and [Month] [Day], the company, in accordance with the requirements of Taoyuan County Public Security Bureau, made payments of RMB 10 million to the Taoyuan County Public Finance account and over RMB 1 million to Mr. Yuan's father. "On [Month] [Day], Taoyuan County unfroze RMB 10 million of the amount frozen in [Year], while the remaining RMB 0.9 billion remains frozen. Among the frozen funds, RMB 0.8 billion is related to YiTan Technology, and RMB 0.1 billion is frozen in the accounts of other independent companies of the WanChu Dream Group, which are not affiliated with YiTan Technology."

"After the above payment was made, the relevant funds were not unfrozen and the personnel were not released on bail," said a source with knowledge of the matter from Yitan Technology.

According to the "Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases of Online Gambling" jointly issued by the Supreme People's Court, the Supreme People's Procuratorate, and the Ministry of Public Security, any of the following circumstances constitutes the act of "establishing a gambling house" as stipulated by the Criminal Law, including establishing a gambling website and accepting bets, establishing a gambling website and providing it for others to organize gambling, acting as an agent for a gambling website and accepting bets, and participating in the profit-sharing of a gambling website.

Yitan Technology stated that the development of interactive gameplay aims to enhance platform activity and user engagement, enrich platform content to increase user stickiness, and the company does not have the intention to obtain illegal profits through this, nor do the company's relevant personnel possess the subjective intent to operate a gambling house.

Yitan Technology's main business includes esports guidance, audio and video, etc. The "gambling game" mentioned by Taoyuan County Public Security Bureau refers to a subcategory interactive gameplay module within the audio and video business, specifically under the Yuer platform. The purpose of developing this activity is to increase the platform's entertainment value and user engagement, thereby enhancing user activity and retention. There are no cash outflows, and the platform does not profit from this activity.

Before the case, Yitan Technology and Wan Chu Meng Xiang Group were also considered star enterprises in the local area. According to the information provided by Yitan Technology, the company obtained the qualification of a high-tech enterprise in Shanghai in a certain year and was recognized as a "specialized, refined, and novel" enterprise in Shanghai in another year. From 2018 to 2020, it was awarded titles such as "Top 100 Software and Information Technology Service Enterprises in Shanghai," "Top 100 Private Service Enterprises in Shanghai," "Top 100 Emerging Industry Enterprises in Shanghai," and "Top 100 Fast-Growing Enterprises in Shanghai."

In the relevant materials, Yitan Technology also lists the contributions of the Play Out Dreams Group to the local area: annually, the Play Out Dreams Group paid taxes of ten million yuan, ten million yuan, and ten million yuan respectively.

As the "gambling" case remains unresolved, the "star" appears to have dimmed somewhat. According to statements from the Wan Chu Moxiang Group, despite the independent operations of its subsidiaries, Yitan Technology, Wangyu Internet Café, and smart hardware, the entire group is facing immense financial pressure and struggling to operate due to the impact of the alleged casino operation case involving Yitan Technology.

Yitan Technology stated that this case has dealt a heavy blow to the company and the operation of its platform, and the company is currently facing severe operational difficulties and the imminent risk of collapse. According to Yitan Technology, before the case, the company's online platform had tens of thousands of "Big Gods" and tens of thousands of anchors, all of whom relied on the platform for income. The company had hundreds of employees, with the majority being R&D personnel. However, after the incident, "the platform needs to settle 100 million yuan in platform income for tens of thousands of Big Gods and tens of thousands of anchor guilds (the brokerage agencies of anchors), but to date, this platform customer settlement payment remains unpaid."

Additionally, since the incident, to ensure the company's survival, Yitan Technology and its related companies have conducted multiple rounds of large-scale layoffs, reducing the workforce by nearly 100 people. Due to the inability to pay severance compensation, all employees' annual year-end bonuses have been canceled. "The company's overall revenue has also been significantly affected; the income for the first few months of this year has decreased by approximately 10% compared to the same period last year, and the total tax paid has decreased by about 50% compared to the same period last year," Yitan Technology stated.

The Wangyu sector and other sectors have been similarly affected. Wangyu Internet Café has locations across numerous cities nationwide, with multiple stores, thousands of employees, numerous franchisees, and many suppliers; and the group's management personnel total over a thousand people. "The aforementioned multiple stores, nearly a thousand employees, and numerous suppliers are all facing the risk of being unable to pay salaries and other payments on time due to frozen funds accounts, potentially leading to employee layoffs, franchisee disputes, and supply chain disruptions."

According to the bank freeze list information provided by Yitan Technology, as of now, a total of . billion yuan remains frozen across accounts, with frozen accounts in the Bixin section and in the Wangyu section. One account is in a frozen (receive-only) status, with a renewal freeze amount of ten million yuan, while the remaining accounts are under limited freeze.

Yitan Technology stated that as of now, due to the freezing of funds amounting to several hundred million yuan by a non-affiliated company, the entire group faces a capital shortfall of several hundred million yuan. Recently, in a letter submitted to the relevant authorities, Yitan Technology said: "We earnestly request the leadership to uphold justice in the law, assist the company in unfreezing the funds in the company's accounts, and help the arrested employees obtain bail pending trial. The company promises to actively cooperate with the public security investigation throughout the entire investigation process, ensuring that the employees on bail actively cooperate with the investigation."