Chinese Grocery Service Missfresh Faces Multiple Lawsuits

Chinese grocery delivery company Missfresh is facing lawsuits from both laid-off employees and investors, alleging unpaid salaries and violations of securities laws.

Missfresh, which was a pioneer in the country’s fast grocery delivery space, sold itself by saying it could make 30-minute grocery delivery profitable, the Financial Times reported Tuesday (Aug. 2).

That was before the pandemic, which saw Beijing cracking down on the tech sector, slowing economic growth and putting off investors. Last week, Missfresh also ran out of cash and laid off much of its staff, and the app was no longer taking orders as of Tuesday in Beijing.

Missfresh has reportedly not been able to make mandatory health insurance and other benefit payments since May. The company also still owes salaries from June and July, according to sources quoted by the FT.

Per the report, there have been “hundreds” of employees in arbitration courts in Beijing and Shanghai, suing over lost severance and salaries. Severance is guaranteed in China’s labor laws, the report noted.

Investors in the U.S. are also suing the company, its executives and Wall Street banks for damages for bringing the company to market in 2021.

According to the U.S. complaint, Missfresh provided false financial figures in its initial public offering (IPO) prospectus. The complaint also alleged that underwriters, including big names like J.P. Morgan and Citigroup, promoted and sold shares based on a “defective” prospectus.

PYMNTS wrote about Missfresh exploring an IPO last year, with the company looking to capitalize on the increased use of eCommerce and delivery services.

See also: Chinese Grocery Delivery Startups MissFresh, Dingdong Maicai To Go Public In US

Reports at the time said 17% of all consumers said they’d made digital grocery orders, and 72% of those said they’d continue to do so even while the world reopened from quarantines.

Established in 2014, Missfresh is headquartered in Beijing and was backed by Tencent. It had raised over $1 billion from investors, according to the FT article.