Following the arrest of two of its senior executives, gym franchise JV Fitness Hong Kong has closed its outlets across the territory, and a court has placed a temporary freeze on its operating capital.
With a winding-up hearing scheduled for August 31, the group has closed its 12 California Fitness, mYoga and Leap fitness centres.
This has left about 100,000 customers, many of whom had paid hefty joining fees, stranded, reports Channel NewsAsia. The customers say they did not receive prior notice of the closure, and in fact had been pushed by staff to extend their membership.
Meanwhile, the firm’s 500 employees have filed a police report alleging that money was transferred out of the company illegally. They claim they are owed about US$1.3 million in salaries.
Customers may have pre-paid about US$130 million in fees, and the fitness chain has already been sued by its landlords and suppliers. On its California Fitness website, the company touts a new 72-hour refund policy.
Investigation ongoing
The winding-up petition was filed by a former director, suspected by employees of being the real owner of the business, according to Channel NewsAsia.
In the latest development, Hong Kong Customs has arrested two management staff of a fitness centre in Kowloon Bay, charged with failing to provide relevant services after having accepted payment from consumers, in contravention of the Trade Descriptions Ordinance (TDO).
Customs had earlier received complaints from fitness centre members that memberships and personal trainer lessons had not been honoured.
After initial investigation, Customs arrested a 57-year-old man and a 45-year-old woman, respectively the company secretary and management staff. They were released on bail pending further investigation.
Under the TDO, a trader commits an offence if accepting payment without intending to supply the product, or may not be able to supply the product within a specified or reasonable period. The maximum penalty upon conviction is a $500,000 fine and imprisonment for five years.