Jumia is battling with $17 million fraud alongside several US lawsuit

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Jumia has revealed some shocking revelations this week, Africa’s largest e-commerce operator has suspended some staff over an $18m sales fraud. The Company is facing “several” lawsuits in New York over its IPO. Losses continue to widen to more than $70m in the second quarter alone. It’s shared down 14%.

According to the Earnings call and Financial Report, Jumia uncovered cases of improper orders placed and subsequently cancelled on its marketplace platform wrongly which gave a different image of its performance in terms of volume of goods ordered. It discovered that fraud was actually happening internally within Jumia’s own employees that consists of a huge network of commissioned agents.

Jumia’s staff and some members of the Jumia Force (Jumia’s agents) were said to have inflated the volumes of order on the marketplace. 

Although Jumia claimed the fraudulent activity didn’t affect its figures in the financial statement, the improper order accumulated to $17.5 million in Gross Merchandise Volume (GMV) value between Q4 of 2018 to Q1 and Q2 of 2019

In its financial report, the company said that these improper orders had no impact on its financial statements even though it acknowledged the reported GMV figure for Q2 2018 had been adjusted in light of the improper transactions. Jumia management also revealed the employees involved have since been suspended pending a review.

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The earning’s call came at the verge of an extended slump in the e-commerce operator’s share price which saw it fall below its IPO price of $14.50 earlier this month. It should be recalled that Jumia initiated its Initial public offering (IPO) on the New York Stock Exchange (NYSE) on 12th April 2019 and recently its stock has remained subject of speculation of impending lawsuits and investigations.

Jumia currently has 4.8 million active customers as of the second quarter of 2019—which is an increase by 500,000 compared to the first quarter of the year. Its GMV is also up by 69% year-on-year and has increased its marketplace revenue (90%) and gross profit (94%). The company is working on a target of breaking even towards the end of 2022.

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Founded in 2012 in Nigeria by Frenchmen Jérémy Hodara and Sacha Poignonnec, Jumia currently operates across 14 countries and the Jumia employees in each of these countries rang bells at the same time to mark the listing.

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