Monday, April 25, 2016 7:42 am
Police in the Chinese city of Hangzhou are searching for the chairman of a wealth management firm who vanished with about 1 billion yuan (£106.55 million) of investor funds, the official Xinhua News Agency reported.
The case is the latest scandal to hit China’s risk-laden shadow banking sector, which has seen a rise in fraud cases in the past few years as the economy slows and retail investors with limited options are lured into dodgy schemes by promises of high returns.
Police are searching for Yang Weiguo, the chairman of Wangzhou Group which is the parent company of asset management firm Wangzhou Fortune, Xinhua said. The state news agency quoted police as saying more than 20,000 people had invested some 2.2 billion yuan in Wangzhou Fortune, which has dozens of branches around China.
Investors had reported “problems with the company’s cash flow” since last Monday, Xinhua said.
Wangzhou Group, the parent of Wangzhou Fortune, on Thursday confirmed that Yang had disappeared, Xinhua said in the report published late on Sunday.
Calls to the phone number for Wangzhou Group’s Beijing headquarters listed on its website did not connect on Monday and calls to Wangzhou Fortune’s Shanghai office were not answered.
But in a video posted by the 21st Century Business Herald, Yang told investors not to worry.
“Hello everyone, it’s me,” said a man in a suit jacket and open-necked dress shirt identified as Yang. “Don’t worry, I will be right back.”
In a separate statement published by the newspaper he denied any wrongdoing.
To repay investors, Wangzhou Group plans to retrieve about 1 billion yuan in principal and interest payments on loans it has made and cover the additional 1.2 billion yuan shortfall by selling property, Xinhua quoted a company statement as saying.
Wangzhou Group also closed its shopping mall in Hangzhou, it said.
According to Xinhua, Wangzhou Group has more than 200 subsidiaries in commerce, automobiles, health and wealth management, including Wangzhou Fortune. It employs some 7,000 people in 70 cities.
Earlier this month, police detained more than 20 managers of the Zhongjin group of finance companies, including its head, at the airport as he apparently tried to flee the country on a chartered plane.
Another wealth management firm, Shanghai-based Jinlu Financial Advisors, has also struggled to pay back investors, causing them to besiege its office in the commercial hub.
In another recent scandal, peer-to-peer lending firm Ezubao bilked 900,000 investors out of $7.6 billion by offering high interest rates which it was unable to pay, in what one executive described in a televised confession as a “typical Ponzi scheme”.