OSAKA (TR) – Zentoshin Co., an Osaka City-based credit card settlement firm embroiled in a major fraud scandal, filed for bankruptcy at the Osaka District Court on Monday with liabilities topping 125.9 billion yen.
The default marks Japan’s largest corporate failure so far this year, according to research firm Teikoku Databank (July 6).
The collapse comes on the heels of a damaging police investigation. In January, several Zentoshin employees were arrested for fraudulently securing credit card merchant contracts for restaurants. Investigators revealed that the employees used third-party names to bypass strict screening processes for establishments that would not normally qualify to use credit card terminals.
The scandal deepened when authorities determined the fraud was a systematic, company-wide operation. Zentoshin itself was subsequently referred to prosecutors on suspicion of violating the Act on Punishment of Organized Crimes.
Provided cash-advance settlement services
Founded in September 2006, the Chuo Ward company primarily provided cash-advance settlement services for the restaurant industry, paying eateries their credit card sales upfront in exchange for a commission.
At its peak in March 2020, the firm boasted annual revenues of around 8 billion yen. However, the COVID-19 pandemic severely battered its client base, as eateries were forced to shorten hours or close entirely. By March 2021, revenue had plummeted to 5 billion yen, plunging the company into consecutive years of massive operating deficits.
Already bleeding cash from the pandemic, the organized crime scandal proved to be the fatal blow. Plagued by evaporating public trust and a sudden inability to secure financing, Zentoshin was forced to abandon its business operations entirely.
The Osaka District Court finalized the commencement of bankruptcy proceedings the same day the application was filed. Attorney Koji Indo of the Habataki Sogo Law Office has been appointed as the bankruptcy trustee.
