Key Points: Yihai Kerry Arawana Holdings Co., Ltd. (Yihai Kerry Arawana) is embroiled in a 5-billion-yuan contract fraud case, raising several critical questions. First, did the company knowingly or should it have known about the falsified and financing nature of the trade? Second, did its warehouse operations materially support or enhance the credibility of the financing trade? Third, how much financing trade might be hidden behind the frequent disputes in its warehouse business? Fourth, does the court’s ruling for nearly 1.9 billion yuan in restitution suggest deeper risks in its warehouse operations?
Yihai Kerry Arawana, a leading player in the edible oil industry, has been ordered by a court to bear substantial joint restitution liabilities after its subsidiary became entangled in a criminal fraud case. Since the announcement of the ruling, the company’s stock has faced sustained pressure, with its market value plummeting by over 10 billion yuan.
Notably, Yihai Kerry Arawana reported both revenue and net profit growth in its Q3 2025 financial results. For the first three quarters, the company achieved revenue of 184.27 billion yuan, up 5.02% year-on-year, and net profit attributable to shareholders of 2.749 billion yuan, a 92.06% increase. In Q3 alone, revenue reached 68.588 billion yuan, rising 3.96%, while net profit surged 196.96% to 993 million yuan. Despite these positive results, the market has reacted negatively. What is the true impact of the lawsuit on the company?
**Involvement in 5-Billion-Yuan Fraud Case Leads to 1.9-Billion-Yuan Restitution Order** The case traces back to a lawsuit filed against Yihai Kerry Arawana’s subsidiary, Yihai (Guangzhou) Grain & Oil Industrial Co., Ltd. (Guangzhou Yihai), in 2024. Between 2008 and 2014, Guangzhou Yihai acted as a warehousing intermediary for Anhui Huawen International Economic & Trade Co., Ltd. (Anhui Huawen) and Yunnan Huijia Import & Export Co., Ltd. (Yunnan Huijia), storing palm oil imported by Yunnan Huijia under agreements with Anhui Huawen.
Initially, transactions followed a "payment before delivery" model. However, Zhang Lihua, Yunnan Huijia’s actual controller, later proposed switching to "delivery before payment," offering kickbacks to Anhui Huawen executives Wang Min and Wang Xiaohu, who agreed. Subsequently, Zhang Lihua exceeded approved withdrawal limits, falsified documents, and concealed sales of the palm oil. Anhui Huawen suffered direct losses of 3.23 billion yuan and indirect losses of 2.015 billion yuan, with 1.881 billion yuan and 1.167 billion yuan, respectively, linked to Guangzhou Yihai and its employee Liu Degang.
In January 2024, Guangzhou Yihai was charged with aiding contract fraud, as prosecutors alleged its employees accepted bribes and facilitated fraudulent withdrawals. On November 19, 2025, a court ruled Guangzhou Yihai liable for 1.881 billion yuan in restitution and a 1-million-yuan fine. The subsidiary has appealed the verdict.
With the restitution amount accounting for over 68% of the company’s 2.749-billion-yuan net profit in the first three quarters of 2025, the financial impact could be severe, exposing significant risks in its warehouse operations.
**Frequent Warehouse Disputes: A Pattern of Risk?** This is not the first time Yihai Kerry Arawana’s warehouse business has faced legal trouble. During its IPO, a similar dispute arose involving its subsidiary Yihai Chongqing and Jiusan Group Chengdu Grain & Oil Co., Ltd. over a storage contract. In 2018, Jiusan Group sued for 13.32 million yuan in losses, with Yihai Chongqing initially cleared of liability in the first trial but ordered to pay in the second.
These cases raise concerns: How much financing trade is concealed in the company’s warehouse operations? Does the repeated litigation indicate weak internal controls?
**How Significant Is the Warehouse Business?** Yihai Kerry Arawana’s core business revolves around kitchen food, feed ingredients, and oil technology products. Warehouse-related income, classified under "other revenue," contributed 1.631 billion yuan in 2023 and 1.804 billion yuan in 2024—a minor share of its 200-billion-yuan revenue. Yet, legal liabilities from warehouse operations threaten to erode profits, prompting questions about risk assessment and internal controls.
**Unresolved Questions: Complicity in Financing Trade? Probability of Massive Payouts** The company asserts that Anhui Huawen and Yunnan Huijia engaged in illicit financing trade—a practice where trade disguises lending. Industry experts note that state-owned enterprises often use warehouse contracts to create the illusion of legitimate transactions.
Key issues remain: Did Yihai Kerry Arawana knowingly participate in financing trade? Were warehouse contracts designed to meet compliance requirements? Notably, Liu Degang, former general manager of Guangzhou Yihai, was sentenced to 19 years for bribery.
In financing trade schemes, warehouse providers may face liability if they exceed a neutral role and enable fraudulent loops. Courts examine whether the provider knew or should have known about the trade’s falsity and whether its actions bolstered the fraud.
Yihai Kerry Arawana defends its actions, stating it followed due diligence by verifying withdrawals with Anhui Huawen and regularly updating inventory records. It denies involvement in fraud, emphasizing strict internal controls and market-compliant pricing. The company also disputes Liu Degang’s conviction, citing lack of evidence for his alleged role in the fraud.
The outcome of this case could have far-reaching implications for Yihai Kerry Arawana’s operations and reputation.
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