Caixin
Dec 04, 2020 07:23 PM
FINANCE

It’s a Case of ‘Buyer Beware,’ Court Tells Anxin Trust Investors

The court decisions come after a banking regulator in July reiterated that trust products cannot provide guaranteed returns and should not make implicit guarantees.
The court decisions come after a banking regulator in July reiterated that trust products cannot provide guaranteed returns and should not make implicit guarantees.

Troubled Anxin Trust Co. Ltd., once the darling of China’s trust industry, has managed to escape two of the multitude of lawsuits it is facing, after it was found to have engaged in illegal business practices.

The company said in a statement (link in Chinese) on Wednesday that a Shanghai court ruled that it did not make significant mistakes in due diligence or management of the relevant trust product and thus dismissed the claims of the two plaintiffs, both investors.

The two investors were looking to force Shanghai-listed Anxin Trust to return the principal of a trust product in which they had invested, and pay interest and their attorney fees.

However, the court said that the two investors should bear the responsibility for their own investment choices as the trust product is deemed high-risk. The plaintiffs can appeal to the Shanghai Financial Court if they wish, according to the Anxin statement.

The court decisions come after a banking regulator in July reiterated that trust products cannot provide guaranteed returns and should not make implicit guarantees.

Anxin Trust was once lauded as China’s most profitable trust company. That was before a 50 billion yuan ($7.6 billion) financial black hole was discovered in its books, along with mounting defaults and opaque operations.

 Read more 
Cover Story: Anxin Trust’s $7 Billion Investment Black Hole

Anxin Trust was found to have illegally misappropriated the proceeds from trust products and created huge payment risks by guaranteeing returns to some investors, Caixin previously reported. The company illegally guaranteed returns for trust products involving some 90 billion yuan, a source close to regulators has said.

Such practices have landed Anxin Trust in more than 50 lawsuits filed by companies involving about 24.6 billion yuan so far, mostly over broken guarantees for investments, according to Caixin calculations based on public information released by the firm.

As of July 18, Anxin Trust had been sued by more than 10 individual investors, according to a July filing (link in Chinese) of the trust firm with the Shanghai Stock Exchange.

Last month, China overhauled regulations governing the country’s $3 trillion trust industry. The new rules, which will take effect on Jan. 1, stipulate stricter requirements (link in Chinese) for shareholders and managers of trust companies, and tighten standards for those allowed to conduct investment business.

Tang Ziyi contributed to this report.

Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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