The streets of Chinese cities have been taken over by fleets of colourful shared bikes that users can hire for less than a dollar a month after paying a deposit. However, some cash-strapped bike start-ups have used this cash to fund operations — against Beijing’s wishes — and hundreds of thousands of consumers have complained after bankrupt groups failed to return the cash.

The mass complaints have exposed an easily exploited loophole in China’s growing bike-rental market, one that is being tested in a civil suit filed this week against Mingbike, a Guangzhou-based bike sharer, the first court case of its kind. 

“Most companies refrain from using deposits to pay for expansion, but we see it in the shared bike space because there is a liquidity and fundraising issue,” said Xue Yu, analyst at IDC, a market research firm.