[Weekly Preview] Missing Funds Remain a Mystery in the Cedar Holdings Investment Fraud (AI Translation)
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文｜财新周刊 王婧
By Wang Jing, Caixin Weekly
曾经号称“广州第一民企”的雪松控股集团有限公司（下称“雪松控股”）走向末路。2024年10月28日至11月1日，广州市中级人民法院开庭审理雪松控股案，涉嫌罪名包括集资诈骗、非法吸收公众存款、背信运用受托财产、妨碍作证等。
Cedar Holdings Group Co., Ltd., once dubbed "Guangzhou's Number One Private Enterprise," is now facing its demise. From October 28 to November 1, 2024, the Guangzhou Intermediate People's Court held hearings to try Cedar Holdings on charges including fundraising fraud, illegal public deposit-taking, breach of fiduciary duty with entrusted assets, and obstruction of justice.
除了雪松控股作为单位主体涉案，检方还起诉了19名自然人，他们多为公司高管或与公司关系密切的人士。以工作岗位划分，被告人主要来自雪松控股大宗贸易板块和财务板块；其中，多数人被控集资诈骗和非法吸收公众存款，其余两项指控仅涉及个别人士。
Besides Cedar Holdings being involved in the case as a corporate entity, prosecutors have also charged 19 individuals. Most of these people are either company executives or have close ties with the company. In terms of their job positions, the defendants are mainly from Cedar Holdings' bulk trade division and finance division. The majority of them face charges of fundraising fraud and illegal deposit-taking from the public, with the remaining two charges concerning only a few individuals.
雪松控股成立于1997年。公开资料显示，2015年，雪松控股的营业收入仅有593亿元；到2016年暴涨至1570亿元，跃居广州民企首位；2017年营收规模继续高速增长，达到2210亿元。2018年7月，雪松控股跻身“世界500强”，此后连续四年上榜。
Cedar Holdings was established in 1997. Public records indicate that in 2015, Cedar Holdings' revenue was just RMB 59.3 billion. By 2016, this figure had skyrocketed to RMB 157 billion, making it the top private enterprise in Guangzhou. The company's revenue continued to grow rapidly in 2017, reaching RMB 221 billion. In July 2018, Cedar Holdings made its debut on the Fortune Global 500 list and remained on the list for four consecutive years.
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- Cedar Holdings Group faced legal hearings for major financial crimes, including fundraising fraud and illegal deposit-taking, impacting 19 individuals mostly from executive roles.
- The company, once a top private enterprise, saw revenues peak at RMB 221 billion in 2017 but later faced a crisis with wealth management products defaulting by March 2021, totaling roughly 20 billion yuan.
- Financial mismanagement and illegal trade financing have led to Cedar's downfall, with numerous asset transfers and ongoing investigations, including accountability of state-owned enterprises.
Cedar Holdings Group Co., Ltd., once considered Guangzhou's leading private enterprise, is now facing legal proceedings that could determine its fate. From late October to early November 2024, the Guangzhou Intermediate People's Court conducted hearings involving Cedar Holdings and 19 of its associates, accusing them of fundraising fraud, illegal public deposit-taking, breach of fiduciary duty, and obstruction of justice. Those involved are mainly executives from its bulk trade and finance divisions, who face charges related to financial crimes. [para. 1][para. 2]
The company was established in 1997 and saw a rapid revenue increase from RMB 59.3 billion to RMB 157 billion between 2015 and 2016. By 2018, it made its debut on the Fortune Global 500 list. The surge in growth is partly attributed to financing trade practices, where companies leverage trade appearances for loans. An array of wealth management products, branded as "Runbang Wealth Management," were sold to the public using counterfeit accounts receivable, leading to defaults starting in March 2021, affecting an estimated 20 billion yuan from investors. [para. 3][para. 4][para. 5][para. 6]
On May 7, 2023, the Guangzhou Public Security Bureau launched an investigation against numerous Cedar affiliates for illegally absorbing public deposits, with coercive measures applied against Zhang Jin, Cedar's real controller. Most executives have pled guilty, although disputes remain over some charges. Over 6,800 investors await potential compensation for their losses while state-owned enterprises involved with Cedar sidestead after losses, moving to control asset damage. [para. 7][para. 10][para. 14]
Cedar has had extensive ties with local governments. Zhang Jin, the company's force, emphasized that Cedar's drive for GDP contribution led to governmental support, even as half to 80% of its commodity trades were fictitious transactions designed to inflate financial profiles. Investigation disclosed complex webs of pseudo-transactions within over 470 offshore and related entities tied to fabricated trades, raising approximately 59.6 billion yuan through financial constructs like wealth management products. [para. 12][para. 16]
Investors were drawn in by financial depictions of Cedar's backing from significant industrial projects and commodities, while insiders recognized its dependency on refinancing strategies. Yet, prosecutors highlighted controversial asset management, contending that approximately 8.4 billion yuan was siphoned off for highly speculative investments or personal luxuries, with portions also funneled overseas via shadow banking channels. [para. 18][para. 20]
The sudden default of Cedar's wealth management products alarmed investors and precipitated a liquidity meltdown, with rapid asset transfers to state entities becoming inevitable to mitigate escalated risks. By March 2021, the already strained financial architecture had arrived at its tipping point, exposing Cedar's broad spectrum of liabilities and instigating a "Cedarlane Task Force" to manage untethered creditors. [para. 22][para. 24]
As accusations of forged trade links and breach of domestic financial protocols swirl, the courtroom drama continues. Zhang Jin defends the legitimacy of Cedar's operational methods, yet tangible evidence regarding asset viability remains indeterminate. KPMG audit reports paint a gloomy picture of Cedar's solvency, conflicting with prior claims of asset excesses over liabilities. Legal wrangling over "insolvency" will ultimately inform recovery prospects for thousands of investor grievances. [para. 26][para. 28]
Public attentiveness now shifts toward court verdicts, as Cedar grapples with the fallout and monetary remediation. Notably, the interplay between local government endorsements, enterprise risk portrayals, and actual operational resilience underscores deeper systemic vulnerabilities exposed by Cedar's collapse, with ongoing investigative efforts into governmental and corporate responsibilities ensuing. As the intricacies of Cedar's financial collapse unravel, stakeholders, including defrauded investors and culpable affiliates, await a judicial resolution. [para. 30][para. 32][para. 34]
- Cedar Holdings Group Co., Ltd.
雪松控股集团有限公司 - Cedar Holdings Group Co., Ltd., once termed "Guangzhou's top private enterprise," is facing legal issues. From October 28 to November 1, 2024, the Guangzhou Intermediate People's Court is trying the company for charges like illegal fund-raising and obstruction of justice. The company and 19 individuals, mostly its executives, are implicated. Cedar's meteoric rise started in 1997, but questionable financial practices contributed to its recent legal troubles and financial downfall.
- Guangzhou Rural Commercial Bank
广州农商行 - The article mentions that Snow Cedar Holdings (雪松控股) was involved in financial dealings with various institutions, including Guangzhou Rural Commercial Bank, which Snow Cedar Holdings had invested in as part of their business strategy to acquire valuable financial licenses.
- Bank of Guangzhou
广州银行 - Bank of Guangzhou was mentioned in the context of Snowcone Holdings' financial affiliations. The article notes that Snowcone Holdings' subsidiary company was involved in financing activities, including investing in Bank of Guangzhou. This indicates that Snowcone Holdings had financial ties with the bank as part of its strategy to acquire numerous financial licenses to facilitate access to large capital pools.
- Open Source Securities
开源证券 - Open Source Securities was a company in which Xuesong Holdings acquired a stake as part of its efforts to pursue financial licenses, which were seen as scarce and valuable for securing significant funds. This acquisition was part of Xuesong's broader strategy to expand its financial operations by participating in various financial institutions.
- Zhongjiang Trust
中江信托 - Zhongjiang Trust, acquired by Snow Holdings and later renamed Snow Trust, faced significant financial issues. After its acquisition in 2019, it became involved in the issuance of "Changqing Series" trust products, backed by false receivables. These products raised 138.57 billion yuan, with 23 billion yuan still unpaid at the time of the incident. The acquisition was pressured as part of Snow's efforts to manage legacy financial issues.
- Dynavolt Tech
猛狮科技 - The article briefly mentions that in 2018, Xuesong Holding attempted to acquire Dynavolt Tech, which ultimately resulted in a loss of 2 billion yuan.
- Qixiang Tengda
齐翔腾达 - Qixiang Tengda (002408.SZ) is mentioned as one of the companies in which Xuesong Holdings invested. Xuesong Holdings attempted to sell its stake for over 80 billion yuan, but the transaction was halted due to a stock freeze. Eventually, during Qixiang Tengda's restructuring, local state-owned enterprises got priority for the proceeds, leaving Xuesong Holdings with only 46 million yuan from the sale.
- Cedar Development
雪松发展 - Cedar Development, once known as Guangzhou's leading private enterprise, has plunged into a fraud controversy. It is involved in financing through fictitious trade, offering investment products with false assets, and accumulating about 200 billion yuan in overdue liabilities. The company's practices included using complex trade schemes to boost sales figures and illicit fundraising, leading to severe financial and legal consequences. The trial involves several high-ranking executives and ongoing government investigations.
- KPMG
毕马威 - In the article, KPMG was hired by Cedar Holdings to provide debt restructuring services. KPMG's final report offered differing conclusions based on three scenarios: liquidation, pessimistic restructuring, and optimistic restructuring. In the first two scenarios, Cedar Holdings was deemed insolvent, with liabilities exceeding assets by 200 to 350 billion RMB. However, in the optimistic restructuring scenario, the company still had a net asset value of 20 billion RMB.
- 1997：
- Cedar Holdings was established.
- 2015：
- Cedar Holdings' revenue was RMB 59.3 billion.
- 2016：
- Cedar Holdings' revenue increased to RMB 157 billion.
- February 2017：
- Guangzhou Development District and Cedar Holdings signed a strategic cooperation framework agreement.
- April 2018：
- The People's Bank of China and other authorities issued the 'New Asset Management Regulations.'
- April 2018：
- Cedar Holdings incorporated credit sales into its flow business and began using accounts receivable for financing.
- July 2018：
- Cedar Holdings made its debut on the Fortune Global 500 list.
- July 2018：
- Cedar Holdings began issuing financing products based on fictitious underlying assets.
- March 2021：
- Cedar Holdings' wealth management products began to default, with a total bust size reaching roughly 20 billion yuan.
- May 7, 2023：
- The Guangzhou Public Security Bureau's Huangpu Branch announced investigations of Cedar Holdings on suspicion of illegally absorbing public deposits.
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