The lower Shenzhen Intermediate People’s Court of Guangdong province said Zhou also faces deprivation of political rights for committing fundraising fraud and illegally taking savings from the general public. All of his personal property will be confiscated. An intermediate people’s court is the second-lowest local court in China, which handles important cases in the first instance, while the High People’s court is a higher-level judicial organ.
The Shenzhen court gave another 17 defendants in the case sentences of between 30 months and 11 years in prison. These individuals were engaged in criminal activity including fundraising fraud, illegal absorption of public savings and professional embezzlement.
Between 2009 and 2021, Zhou and his employees collected about 109 billion yuan (US$15.3 billion) from more than 480,000 individuals by issuing online investment vehicles disguised as debt swaps and consumer finance products.
The Shenzhen-based company was going through a “huge” shortage of funds at the time, and the proceeds were mainly used to cover the company’s capital expenditure, as well as principal and interest payments for maturing debt and other financing projects. As the actual controller of some of the investment vehicles, Zhou bagged more than 20.4 billion yuan himself, according to the Shenzhen court.
China’s P2P lenders are internet-based lending platforms that match private investors – individuals with money that they are willing to lend – with individuals and small businesses that want to borrow. With each transaction, the platforms take a small commission, while investors can make up to 10 per cent in annual returns.
Chinese shadow bank says deeply insolvent after US$36 billion asset shortfall
Chinese shadow bank says deeply insolvent after US$36 billion asset shortfall
P2P lending was once hailed as a financial innovation and an important part of China’s credit mechanism, with online platforms issuing more than US$150 billion in loans from 50 million investors at the industry’s peak in 2015. However, problems of fraud and defaults quickly began to surface, and in August 2016, regulatory authorities including the China Banking Regulatory Commission launched an industry-wide crackdown to rein in fraudulent activity and tame the country’s rapidly expanding shadow-banking industry.
Founded in 2009, Hongling Capital was once China’s largest P2P platform, boosting a trade volume of 274.7 billion yuan by August 2017. The company was primarily known for large loans, meaning that it engaged in risky projects that could require financing of up to 100 million yuan. These projects were often turned down by traditional financing institutions such as banks.
Beware of ‘fake financial innovation’, China’s new overseer warns industry
Beware of ‘fake financial innovation’, China’s new overseer warns industry
China’s industry rules released in August 2016 capped the size of loans that individuals and companies could borrow through a single P2P platform at 200,000 yuan and 1 million yuan, respectively.
This dealt a heavy blow to Hongling Capital. In less than a year, the company said it intended to wind down its existing products and distressed assets, and quit the P2P business in three years. At the time, the company had 800 million yuan in loans that were not paid back by borrowers.