The Collapse of the First Oat Milk Stock (AI Translation)

【周刊提前读】燕麦第一股崩塌 商业模式早就埋隐患

Nearly a year after being delisted from Nasdaq, Inner Mongolia Yanguifang Eco-Agriculture Technology, also known as "Yanguifang," faced a criminal case in a Shanghai court. [para. 1] On February 12-13, 2025, Shanghai Minhang District People's Court held the first trial of He Junguo, founder and former CEO, and Sun Zhu, ex-VP, charged with illegally absorbing public deposits. They allegedly gathered over 1.4 billion yuan from more than 10,000 individuals, with a suggested prison sentence of 12 to 15 years each. [para. 2] Yanguifang's decline began with He Junguo's detention on January 10, 2024, affecting consumer confidence, leading to a stock price drop of 13.4% that day. By October 2023, Yanguifang was involved in a pyramid scheme nationwide, as announced by the Ministry of Public Security. [para. 3]

Yanguifang, originally hailed as a major player in China's whole grain industry, found itself embroiled in a sophisticated financial scheme. The Ministry of Public Security revealed that He Junguo, through Yanguifang, created a complex business model that misled over 10,000 members by using "contract farming" shams and tiered membership promises, attracting upstream and downstream participants in a massive pyramid scheme, affecting approximately 520 million yuan. [para. 4][para. 5] The company established multi-level distributor systems and lured customers into purchasing products by offering company stock and equity, promoting unauthorized financial investments totaling over 612 million yuan. [para. 6]

Despite the chaos, Yanguifang's e-commerce platforms, such as JD.com and Taobao, remain active, handled by a minimal operational team. Meanwhile, bankruptcy was declared as suppliers ran into unsustainable operations, with farmers unable to fulfill oat bran contracts and factory employees left without wages. A letter was sent from Wuchuan County government to Shanghai’s Minhang District Court proposing a jointly-managed account to mediate debts and revive production. [para. 7][para. 8]

He Junguo's background included a significant stint at San Zhu Liang before founding Yanguifang. The company ventured into Nasdaq by the end of March 2023, with ambitious plans to globalize its products. However, an internal crackdown from October 2023, resulting in the detention of various executives, set off a chain reaction that shocked stakeholders, customers, and the government. [para. 9][para. 10] Many investors became trapped as Yanguifang was de-listed, a final blow after attempting to handle more than 860 million yuan in unauthorized fundraising. [para. 11]

Yanguifang's collapse highlighted a controversial business strategy that offered lucrative financial projects linked to product orders, separating genuine consumer demand from investment drive. With promotional projects like "Grassland Gate," "Option Execution," and others promising significant returns, He Junguo and his team cultivated a risky environment affecting thousands while evoking regulatory scrutiny. Prosecutors emphasized how fraudulent schemes masqueraded as legitimate sales, ultimately spearheading one of the largest fundraising fraud cases in China. [para. 12][para. 13]

The indictment encapsulated an elaborate façade run by He Junguo and associates, manipulating customer investments into multi-level marketing tactics. Illusory gains such as equity holdings and fitness ventures captivated consumers, who often made bulk purchases they could not utilize, lured by promised rebates and shares. In light of these findings, Yanguifang's intricate network of unauthorized investments spread through social channels, meeting few legal thresholds and accentuating investor downside, significantly bringing China's first oat-centric company to its knees. [para. 14][para. 15]