Did you know: A phone brand went bankrupt after an exec gambled away millions

Running a smartphone business is hard, and the list of dead manufacturers is enormous. There’s Nokia, BlackBerry, Microsoft, LG, Palm, and many more. These brands either died because they supported the wrong operating system or because they simply didn’t have the resources to compete with top players like Samsung.

Then there’s the shuttered Chinese manufacturer Gionee. It didn’t die because of bad technological choices or because it was squeezed out by rivals. It’s widely believed that the manufacturer died because its chairman gambled away millions of dollars of the company’s money.

Gionee was a fixture in the Chinese and emerging market smartphone space in the early to mid-2010s. In fact, the firm’s budget Android phones were even available in the US as rebadged devices under the BLU brand. The company also had a very modest presence in India during this time period.

Gionee’s cash was flushed down the toilet

According to reports from several Chinese outlets at the time, Gionee started having issues paying its suppliers in late 2017. This was despite the fact that it had apparently made a net profit of 760 million yuan (~$104 million) in the first half of the year and was said to have a cash balance of 1.03 billion yuan (~$142 million).

It turned out that company chairman Liu Lirong had been “borrowing” money from the company, according to the Securities Times:

I founded Gionee 16 years ago and have always been an absolute authority in the company. I have no other income, so it is inevitable that I have mixed public and private life in my life and borrowed company funds.

Just how much money did he “borrow,” then? It was initially believed that Liu had lost 10 billion yuan (~$1.37 billion) due to gambling in Saipan. However, the chairman claimed that he had, in fact, lost “about a few billion.” Nothing serious, only a few billion. Company shareholders reportedly estimated that he had gambled away six billion yuan (~$825 million).

Despite these hefty gambling losses, Liu claimed that the company’s marketing expenses were to blame for its financial troubles. This was entirely at odds with the firm’s apparently healthy financial situation in the first half of 2017.

What happened to Gionee afterward?

What’s particularly notable about this saga is that when Gionee first started having financial troubles, the company still seemed to have a solid relationship with most of its supply chain partners. It’s believed that suppliers initially chose to cooperate with the smartphone brand when news of the firm’s debts first broke. However, Liu claimed that these companies stopped supplying Gionee with parts when his gambling came to light.

Gionee went bankrupt in December 2018, but the company’s Indian unit was picked up by Indian brand Karbonn Mobiles. Unfortunately, this gamble (heh) didn’t pay off either, as Karbonn Mobiles has had its own serious financial troubles.

It’s fair to say that Gionee wouldn’t have been a massive player even without its chairman’s gambling addiction. After all, the likes of HUAWEI and Xiaomi had already managed to outfox it in the mid-2010s. But the company would’ve certainly been around for a longer time.