Chinese Social Media Platform JoYY Denys Muddy Waters' Fraud Claim

November 20, 2020 1:19 pm

Beijing (PingWest)- Chinese video-based social media firm Joyy denied Muddy Waters’s allegation of fraud on Thursday, say the U.S short seller’s report was full of errors because it lacks a basic understanding of China’s live-streaming business.

Joyy, which is in the process of selling its domestic business to search giant Baidu, said Muddy’s report contained numerous errors and misleading conclusions and interpretation.

Muddy Waters released a 71-page report that claimed up to 90 percent of YY’s live-streaming revenue was fraudulent. YY used internal bots or external bot farms to fabricate human users who paid for virtual gifts, according to the report.

Bots, which disguised as paying users, accounted for about half the value of all virtual gifts, Muddy Water claimed, adding that YY’s online dating business and Joyy’s overseas live-streaming platform Bigo Live also inflate its revenue, “about 80% of their respective revenues were fake.”

Muddy Waters Research founder Carson Block earlier said Joyy’s livestreaming service YY is “guilty of bot forming, creating fake transactions and having fake users.” 

“The operating metrics disclosed by Joyy are commonly used by ts industry peers. Livestreaming has become a key revenue engine for companies in the internet sector,” Joyy said in the statement.

JOYY is the latest Chinese firm targeted by Muddy Waters. In January, it accused Starbucks' Chinese competitor Luckin Coffee of inflating revenue and financial numbers.