Arrest of billionaire chief of Chinese e-commerce giant JD.com was on suspicion of rape

Chief executive Liu Qiangdong was taken into custody in the US on Friday evening and company's shares have tumbled

Liu Qiangdong, founder of JD.com, was arrested in Minneapolis and held for 16 hours. AP

The arrest of a Chinese billionaire in Minnesota in the US over the weekend was for suspicion of rape, according to local police, increasing the seriousness of the potential legal charges against one of the country’s most prominent and wealthy businessmen.

JD.com chief executive Liu Qiangdong was taken into custody Friday evening and released just more than 16 hours later on an accusation of what was originally disclosed only as “criminal sexual conduct,” according to county records. The police then released a report that specified the suspected offence as “criminal sexual conduct - rape - completed”.

Minneapolis Police Department spokesman John Elder said police responded Friday night, found Mr Liu and another individual, took photos and arrested the CEO, without specifying the location. The case is being investigated as a rape, he said, but authorities decided not to keep Mr Liu in custody and haven’t imposed any travel restrictions while conducting their investigation. Authorities may decide not to charge Mr Liu at all, he added.

Mr Liu, 45, has returned to China and his work at JD.com, the country’s largest e-commerce company after Alibaba Group. The $42 billion business is backed by investors including social media titan Tencent, Walmart and Alphabet’s Google. But Mr Liu, who uses the English name Richard, has led JD.com since its founding and controls it through special voting rights. It’s unclear how or whether his legal issues will affect the business.

“It’s hard to see this as anything but bad for Richard Liu and bad for JD.com. Even if it turns out that the charges were completely groundless, it’s a lot of bad press,” said Isaac Stone Fish, an Asia Society senior fellow. “It will certainly be a big distraction.”

JD.com’s US-traded shares fell 6 per cent in New York Tuesday and have dropped 29 per cent this year.

Mr Liu’s plight set Chinese social media afire, ranking among the 10 most popular topics on social media since Sunday. His orange-clad mugshot, memes and more than a million direct comments on the Twitter-like Weibo service have pushed important national events into the background, such as a much-vaunted Forum on China-Africa Cooperation in Beijing this week intended to tout the country’s achievements and investments on the continent. Even pictures of a woman purported to be the alleged victim were allowed to proliferate in a country where the barest hint of political dissent invokes a widespread online censorship campaign.

Mr Elder said the investigation is in its early stages. Although Mr Liu was released from custody, they are confident they can reach him when necessary, he added.

The police report lists the potential charge as a felony and says the arrest was not from a warrant, but a local arrest. The police’s body-worn camera was active at the time, it said.

Local attorney Joseph Friedberg, who JD confirmed as representing the billionaire, said Mr Liu was neither questioned nor told why he was under arrest. Mr Elder said it was “absolutely” standard practice to tell people what they were accused of when arrested and labelled Mr Friedberg’s claim “preposterous”.

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Mr Liu is a student in the university’s Carlson School of Management and was in Minneapolis to complete the American residency of a doctorate of business administration programme. The course takes place mainly in Beijing with a cohort of students whose average age is 50 and include many captains of industry

“I’m very confident that there will be no criminal charges,” Mr Friedberg said. “They realised that this whole thing was ridiculous and they turned him loose. They didn’t ask for his passport, they didn’t ask for any bail.”

This year, a guest at a party Mr Liu hosted in downtown Sydney was convicted of sexually assaulting a fellow guest after the event. There was no accusation of any misconduct by Mr Liu. The billionaire lost a legal attempt to keep his name out of the records. Over the weekend, JD said it will take legal action against the publishing of untrue reports or rumours.

If he’s charged, “reputation damage will definitely be possible because Richard Liu is known to be a role model for many young people,” said Eric Wen, founder of the Blue Lotus Research Institute. Even if he isn’t charged, the photos of Mr Liu in prison garb would likely mar his reputation abroad, Wen added. “That will be permanent and it will affect the reputation of the business globally. But the effect on business in China would be limited.”

Mr Liu became one of China’s best-known self-made billionaires by turning a chain of electronics goods stores into an online powerhouse selling everything from mobile gadgets to fresh seafood. It’s Walmart’s partner in the country and its largest shareholder is WeChat operator and games giant Tencent. The CEO has amassed a fortune of about $7 billion, according to the Bloomberg Billionaires’ Index.

His wife Zhang Zetian is famous in China in her own right with 1.5 million followers on Weibo. She was dubbed “Sister Milk Tea” after a photo of her holding the drink went viral on social media in the country.

Liu’s JD has started pushing into physical stores and the billionaire speaks openly about his longer-term goal of expanding internationally, though its incursions overseas have so far mostly been limited to Thailand, Indonesia and Vietnam. Liu has his eyes on the affluent consumers of Europe and the U.S. as he makes substantial investments in the infrastructure needed to supply millions of customers around the world.

Read more: JD.com Losses Surge Alongside Soaring Spending on Expansion

His high-spending strategy has drawn criticism from investors who would prefer it remain focused at home. JD’s share price hit a record high in January only to tumble after failing to deliver the full-year profit many analysts had expected. In the June quarter alone, the company had a net loss of 2.2 billion yuan ($322 million).