An independent forensic review released in April 2026 by Hong Kong-listed company NETJOY Holdings Limited (02131.HK) has exposed a major internal control fraud case spanning nearly three years. The investigation revealed that a 3C project operated by the company fell victim to collusion between a customer and suppliers, leading to the misappropriation of approximately 170 million yuan in prepayments and a final loss of about 141 million yuan. This systematic diversion of funds, which involved internal employees working in concert with external customers and suppliers, has laid bare severe deficiencies in the company's internal control systems. Trading in the company's shares has been suspended since April 1, 2025, and the halt has now persisted for over a year.
The origins of the fraud can be traced back to November 2022. At that time, NETJOY initiated a cooperative project for 3C electronic products with a downstream customer, who designated Supplier A and Supplier B to provide the goods. The company prepaid these two suppliers, expecting to profit from subsequent sales.
However, by the first three quarters of 2024, abnormal fund flows had already emerged. The company had prepaid a cumulative total of approximately 497 million yuan to Supplier A and Supplier B, but had only received goods worth about 165 million yuan. As of the investigation date, around 170.4 million yuan in prepayments remained outstanding. Although a small portion of funds was returned, the unusual patterns of refunds and goods delivery raised red flags, ultimately prompting the company to initiate an independent investigation.
The results of the independent forensic review, announced in April 2026, detailed the full picture: the group's 3C project suffered from collusive fraud between the customer and suppliers, leading to the misappropriation of roughly 170 million yuan in prepayments and a final loss of approximately 141 million yuan. The investigation concluded that the fraud involved systematic collusion between internal employees and external partners, characterizing it as a typical "inside-outside" coordinated scheme.
The success of the fraud was rooted in systemic issues within the internal control framework. The investigation identified three major deficiencies in the project's internal controls: First, there was excessive reliance on the business team. Critical decision-making and execution for the project were highly concentrated in the hands of a few business personnel, lacking necessary checks, balances, and oversight mechanisms. The business team wielded disproportionate influence over supplier selection, contract signing, and prepayment approval processes, creating opportunities for subsequent misconduct. Second, risk monitoring mechanisms failed. The company's processes for vetting supplier qualifications and conducting background checks were ineffective. During the audit process, the auditors had expressed significant concerns about Supplier A's qualifications, business substance, and shareholder background, but these warnings did not prevent the outflow of prepayments before the risks materialized. Third, control principles over goods were circumvented. Under standard procedures, prepayment disbursements should be tied to the delivery progress of goods, with clear checkpoints for acceptance. However, in this project, these control principles were systematically bypassed. The company lost oversight of the goods' flow, allowing substantial prepayments to be released without corresponding genuine deliveries.
It is noteworthy that during the 2024 annual audit, the auditors had already raised serious concerns regarding Supplier A and explicitly recommended that the company engage an independent investigative advisor to assess potential management corruption or internal control failures. This warning from the auditors served as the catalyst for the subsequent independent investigation.
NETJOY has not yet formally disclosed the quantitative impact of the independent investigation on its financial statements. However, based on available information, the financial damage to the company is already evident. An announcement indicated that the company expects its 2024 annual results to show a significant decline, with a projected loss of approximately -195.8 million yuan, a decrease of about 2897.71% year-on-year. The scale of this loss is directly linked to the prepayment misappropriation incident.
More seriously, the company's information disclosure system has ground to a complete halt. As of March 2026, the company had not released its full-year 2024 results, its 2025 interim results, or its 2025 annual report. The related annual and interim reports had also not been dispatched. The company attributed this delay to the ongoing independent investigation and the process of seeking a resumption of share trading, stating that the auditors require the investigation findings to perform subsequent audit procedures.
This incident at NETJOY stands as another recent典型案例 in the Hong Kong stock market following internal control issues exposed at several other companies. The systematic collapse of three key defensive lines—excessive reliance on the business team for project operations, the circumvention of control principles in prepayment approvals, and the comprehensive failure of risk monitoring—ultimately culminated in a financial loss of 141 million yuan. This also caused the company's performance to swing from profit to loss, led to a complete failure to publish financial reports, and resulted in a prolonged suspension of its share trading.
For investors, this event serves as another stark reminder to scrutinize the internal control systems of listed companies. Beneath seemingly robust financial figures, the easily overlooked checkpoints of risk control are often the very factors that determine a company's fate. Currently, NETJOY's path to reinstating trading remains long. Whether the company can successfully meet all resumption guidelines set by the Stock Exchange, publish all outstanding financial reports, and rebuild market trust remains an open question.