EK Cooling allegedly has slipped itself into a hot soup of seemingly endless financial woes, where it has not paid its staff, suppliers, and contractors for many months as the company is facing liquidity problems and a surplus of inventory left unsold, stuck in the warehouse for a more extended period. Gamers Nexus investigated these claims made by former and current personnel, where he found trails of unpaid bills lasting as long as three to four months and unpaid raises that accumulated for almost a year.
The investigation first highlights suppliers who claimed not to be paid over four months. Dan Henderson is one such person who took to LinkedIn to share his experience, highlighting the challenges he faced during his time with the company. EK responded to this by sending Dan a cease and desist letter for expressing his requirement to get paid like many others who weren't as vocal. To emphasize the scale of this mismanagement, Dan isn't the only person who shares this similar story. Some haven't received their commissions despite promises and cases where overtime hours have been shaved off despite serving the time.
The Endless Purchasing Loop and Unsold Inventory
EK Water Blocks has two entities—a Slovenian-based headquarters and a US-based subsidiary, EK Cooling Solutions. Steve narrated the series of events in detail, stating that the company was reportedly irresponsible and negligent regarding payment. Consequently, partners and employees are forced to share the burden of alleged mismanagement. It all begins with its extensive range of products, leading to a surplus of goods. EK has over 230 water blocks, 40 liquid cooling kits, 85 reservoirs, 40 pumps, 73 radiators, and 212 miscellaneous accessories.
EK does not own all its manufacturing facilities and outsources the task. The companies tasked with manufacturing take orders on a minimum order quantity, which leads to EK ordering items that take a lot of time to sell. Hence, the company ends up with unsold surplus goods worth millions of dollars in its warehouse while being in a situation where it cannot pay bills amounting to five figures. Eventually, suppliers conduct business with EK when there is an upfront payment rather than a line of credit.
Selling specialized liquid-cooled items is challenging and time-consuming, even for well-known manufacturers. For example, a retailer could allegedly sell only two units of its Asus ROG Maximus Z790 waterblock. Another retailer purportedly said EK's revenue fell by 32% in one year, making it extremely difficult to sell all of its minimum order quantity. Above all, EK products are costly, making their products more inaccessible to many buyers within this niche ecosystem.
Internal Bickering and Accusations of Theft
While the non-payment of all personnel is terrible enough, the company has communication issues, which lead to both divisions engaging in petty squabbles and name-calling, and they accused each other of theft. These problems need to be handled with good communication and excellent care, something EK desperately needs to implement. EK has reportedly not paid franchise tax to the State of Texas and has closed its office and warehouse, which employees learned about when it reached the location.
Steve also said that the company has been scrambling to make payments once it caught wind of this investigation. The company is also selling one of its buildings to pay its debts and has sold workstations and prebuilt gaming PC systems under the names 'EK Fluid Works' and 'EK Fluid Gaming' that's outsourced to SwiftTech with hopes of getting a positive cash flow. However, it was further highlighted that despite this, complaints about missing high-value inventory had prompted the threat of involving authorities who would search employees' households. However, this was not pursued further at the time.
The main issue is that EK lacks communication with its personnel—both current and former—employees and contractors. Having its lawyers send a cease-and-desist letter, even if it involves one person, is counterproductive and harmful, as many with the same need to be paid. It also doesn't help when a company with multiple financial obligations has booked a booth at Computex 2024, which costs a significant premium for a company that allegedly encouraged a culture of economic mismanagement.
Ultimately, EK needs to address its inability to communicate with its personnel first, halting many steps that led to financial mismanagement. Many companies make terrible financial decisions, leading to a complete collapse. EK is a well-known company for its niche-specific liquid cooling products. However, the burden of financial disarray causes significant damages; it will take nothing short of a miracle to fix many of these issues.
