Private Equity Boss Faces Life in Jail After Bilking Investors
The detained boss of Fuxing Group, a private equity firm that bilked investors of billions of dollars, may face life in prison if found guilty of illegal fundraising, amid the country’s ongoing crackdown on major financial fraud.
Eight suspects who worked for Fuxing were arrested on suspicion of illegal fundraising and insider trading on Sunday, according to a statement on the same date from the Shanghai No. 2 People’s Procuratorate. Those included a suspect surnamed Zhu, most likely referring to company Chairman Zhu Yidong.
Police brought Zhu back to China on Aug. 29, after he fled the country in July amid a cash crunch at Fuxing.
Zhu is being charged with illegal fundraising, the statement said, which is different from the charge of illegally absorbing money from the public. The latter carries a maximum prison term of 10 years, while the former could receive as much as life in prison depending on the nature of the case and suspect’s motives.
The arrests marked a high point for the investigation into a Shanghai-based company whose downfall has become one of the biggest crises ever for China’s private equity industry. The case has also become a top priority for regulators eager to show they are tackling a mounting number of similar cases that have raised risk levels in the country’s financial system.
Fuxing controls four private equity funds that have registered a total of 160 asset management products that took in money from private investors and banks. The group managed assets worth more than 35 billion yuan ($5.1 billion) in 2017, with trading volume topping 30 billion yuan, according to Fuxing’s website.
Shanghai police have been stepping up efforts to recover Fuxing’s assets to compensate its investors. Last month, they froze 170 million shares of Donghai Securities Co. Ltd. held by a unit of Shenzhen-listed China Media Group Co. Ltd., a company controlled by Fuxing through a number of intermediaries.
Contact reporter Leng Cheng (firstname.lastname@example.org)
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