That expansion, however, relied heavily on debt to fund LeEco’s ever-expanding list of projects and brought in a wide range of investors to fund the newly established LeEco companies. Some had little investment experience, and were presented with guarantees that obscured the risk of start-up investing.
“Today LeEco faces huge challenges and I take full responsibility,” Mr. Jia wrote in an open letter published Thursday morning in Beijing, asking for more time for LeEco and its electric car business. “We will fully repay our debts to financial institutions and suppliers,” he wrote.
Mr. Jia began his career a long way from Beijing’s booming tech corridor, starting in a county tax bureau in Shanxi, a coal-rich northern province. As China’s dot-com boom got underway, he moved into tech, starting a telecommunications company, and then founded Leshi Internet in 2004.
In 2008, his business received investment from a private equity firm led by Ling Wancheng, a member of one of Shanxi’s most powerful families and the younger brother of the top aide to Hu Jintao, then the president.
The aide, Ling Jihua, was sentenced last year to life in prison on corruption charges. Ling Wancheng, who is wanted by Chinese authorities, moved to the United States. Mr. Jia has acknowledged in interviews with the Chinese press that he brought in Mr. Ling for his political connections.
Two years later, the little-known Leshi Internet received a coveted slot for a public listing. At the time of its initial public offering, Ling Wancheng’s private equity firm was Leshi Internet’s third-biggest shareholder, after Mr. Jia and his sister.
Leshi Internet’s shares soared after going public as China’s retail investors got one of their first opportunities to bet on a start-up with big dreams. By 2015, the stock price propelled Mr. Jia to near the top of China’s rich list, according to the Hurun Report, which tracks the country’s wealthiest citizens.
But Mr. Jia led his company into an array of businesses that have not panned out. He invested hundreds of millions of dollars in developing LeEco’s smartphone business Le Mobile, in what the new LeEco chief executive, Liang Jun, last week conceded was mistimed: Fierce competition has eroded profit for most handset makers.
Last year, as Leshi Internet exhausted its credit lines at a dozen Chinese banks, Mr. Jia began pledging shares in LeEco companies as collateral for more loans, borrowing at least $2.1 billion from a variety of nontraditional lenders like security brokerages, trust companies and capital management firms. Today, shares Mr. Jia controls in at least six LeEco companies are pledged to lenders, according to Chinese corporate records.
Those same shares were then frozen by courts this week as Mr. Jia had personally guaranteed the debt held by creditors of Le Mobile.
Mr. Jia’s personal guarantees bind together much of LeEco’s debt, setting up a potentially messy situation that could embroil all of the LeEco companies as creditors battle for assets. No LeEco company has filed for bankruptcy, a company spokesman said, and LeEco could still receive a bailout from investors or a state-owned company.
LeEco’s electric car ambitions are centered on Los Angeles, where the financially troubled start-up Faraday Future, with more than 1,400 employees, is developing high-end electric cars in a bid to challenge market leader Tesla Motors.
Mr. Jia remains Faraday Future’s largest shareholder and emphasized in his letter on Thursday that he would dedicate his energy to getting the company’s first production-ready model, called the FF 91, into mass production.
Faraday Future is in the process of raising more than $1 billion dollars, a spokesman for the company said in an email, noting that LeEco and Faraday Future are separate companies.