The company once considered the "Netflix of China" must face a fraud lawsuit over its failed $2 billion merger with American smart TV manufacturer Vizio. On Friday, a California federal judge largely rejected LeEco's motion to dismiss.

Vizio alleges that when the two companies agreed to merge in the middle of 2016, LeEco was in worse financial state than it was letting on publicly. The lawsuit in California further contends that LeEco needed the merger to create the public impression of its own financial health, and even further, that the merger was used as part of a "secret ...