In Depth: The Commodity Giant That Went From Boom to Busted

Cedar Holdings Group Co. Ltd., once a leading private enterprise in Guangzhou, China, is now embroiled in a criminal case involving its founder and other executives [para. 1]. The charges include fundraising fraud, illegal absorption of public deposits, and obstruction of justice, among others [para. 2][para. 3]. The company's failure to repay 20 billion yuan ($2.8 billion) in wealth management products in April 2020 impacted approximately 8,000 investors both in China and internationally [para. 4]. Founded in 1997, Cedar climbed the ranks of major private enterprises, securing 359th place in the 2021 Fortune Global 500 with revenues of $33.8 billion [para. 5]. Zhang Jin, the founder, was ranked 87th among Chinese billionaires by New Fortune magazine the same year [para. 6]. An investigation revealed that Cedar's business model heavily relied on dubious financing deals and fake trade flows to inflate revenue and secure funds [para. 7][para. 9]. Cedar's vast trading network, linking companies in Shanghai and Guangzhou, involved partnerships with state firms that may have invested as much as 20 billion yuan [para. 10].

As Cedar's finances worsened, the Guangzhou police initiated an investigation leading to arrests [para. 11]. Thousands of investors are now awaiting the judgment, with possible government scrutiny of Cedar's interactions with state-owned enterprises in Guangzhou [para. 12]. Cedar was originally an offshoot of Junhua Group and experienced considerable growth when Zhang Jin, who holds a finance degree, took an aggressive approach in acquiring financial licenses [para. 13][para. 14]. Cedar expanded rapidly by investing in various financial institutions and acquiring high-stakes assets that strained its finances [para. 16]. This aggressive strategy briefly positioned Cedar as Guangzhou's top private enterprise and earned it a spot in the Fortune Global 500 list [para. 19]. However, its main business was fraudulent, artificially inflating revenue through faked trade flows and fundraising facilitated by its extensive network of shell companies [para. 22]. Prosecutors accused Cedar of selling wealth management products on fake assets, using the inflows to fund its expansion [para. 26]. These assets were primarily accounts receivable among interconnected shell companies that provided payment guarantees but were mostly empty shells [para. 27].

Since April 2018, Cedar has raised 59.6 billion yuan through these products, but 20 billion yuan of it remains unpaid [para. 28]. The funds were channeled into ambitious acquisitions, some resulting in losses, while significant sums were spent on personal luxuries and transferred abroad [para. 29]. The insolvency of Cedar is critical to the case, as it affects the potential reimbursement of investors and the defendants' sentences [para. 30]. While Zhang and other executives argue against the claim of insolvency, stating the company's assets exceeded its liabilities, forensic audits suggested otherwise [para. 32]. Such audits confirmed Cedar's insolvency, with its business segments consistently operating at a loss [para. 33]. Investors and trial attendees are hopeful that authorities will reveal asset details to resolve creditor claims, with Zhang offering part of his personal assets as repayment [para. 35].