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March 31, 2017

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1.5b yuan lending fraud trial begins

A high-profile financial fraud trial — involving 1.5 billion yuan (US$220 million) of investor savings — started at Xuhui District People’s Court of Shanghai yesterday.

Fifteen former employees of the now-defunct online peer-to-peer lender Jinxing Investment were on trial. Ji Jianhua, the company’s chief financial officer, was accused of illegally raising funds, and 14 senior managers have been accused of illegally absorbing public savings.

Part of the cash Jinxing received was diverted to personal or related accounts controlled by the company’s president Wang Mian, while investment projects promised to investors were all faked, Ji told the court yesterday.

Prosecutors said there were still 400 million yuan of repayments that weren’t made in the wake of the case being exposed.

Operated by Shanghai Uprosper Asset Management Co and established on August 2014, Jinxing Investment offered short-term, peer-to-peer lending products promising high rates of return, the prosecutors said.

Investors flocked to sign up online, enticed at the prospect of higher returns than bank deposits offered, as well as easier access to loans than the banks allowed.

Wang, who hasn’t been found since the company’s liquidity risks unfolded last June, grabbed some 160 million yuan belonging to the company before his escape, the court heard.

Jinxing was shut down after Wang’s disappearance and Ji’s surrender to the local police last June.

More than 200 investors gathered in court in Xuhui for the hearing yesterday, many of them elderly investors. Trials of the 14 senior managers would be held at a later date, the court said.

By the end of December, about a third of the nearly 4,000 Chinese peer-to-peer platforms were found to have been involved in fraud, according to Yingcan Group.

The lack of adequate regulation and the often dubious legitimacy of how the platforms operated were among reasons for the losses.


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