Zhu Yidong, chairman of Shanghai Fuxing Financial Holdings, fled overseas after defaulting on bank loans and defaulting on payments to investors.China's securities regulator ruled in July that he had engaged in market manipulation.
Chinese police, in cooperation with authorities in a certain country, have arrested a hedge fund manager who once managed $5 billion in assets.The man fled China after defaulting on a bank loan and missing payments promised to investors.
China's securities regulator ruled in late July that Zhu Yidong, chairman of Shanghai Fuxing Financial Holdings (Group) Co., Ltd., had engaged in market manipulation and banned him from entering the securities market for three years.Fuxing once managed 35 billion yuan ($5.1 billion) in assets through four fund management companies that issued 158 hedge fund and private equity fund products.
The Fuxing case is the most high-profile case of a slew of private equity and hedge funds that have collapsed this year amid a stock market slump and regulators' crackdown on nonbank financial institutions.
Zhu Yidong's disappearance in late June prompted protesters to gather at Bank of Shanghai's Pudong branch, demanding damages from the bank, which they said had distributed Fuxing Group products.Bank of Shanghai said at the time that it had never authorized its employees to sell any products issued by Fuxing Group.
The China Securities Regulatory Commission launched an investigation into Zhu Yidong, 36, and the Fuxing Group after China Central Television reported in January that Zhu was suspected of manipulating shares in Shenzhen-listed Dalian Electric Porcelain Group Co.
Authorities alleged that Zhu Yidong and an accomplice used 25 institutional accounts and 436 personal accounts to manipulate the company's stock price.China Central Television reported on Wednesday night that Zhu Yidong had been escorted back to China.
The case set a new precedent for market manipulation, said Wang Bo, director of private equity fund research at Noah Holdings, a Shanghai-based wealth management consultancy.
The secondary market price is usually higher than the primary market price, but this stock was the opposite, he added, adding that he allegedly bought low on the primary market and then managed to push the secondary market price higher.
Caixin, a financial news site, reported that Zhu had pledged shares in listed companies to secure bank loans — a financing method that has exploded in popularity over the past two years, prompting Shanghai and Shenzhen stock exchanges to tighten restrictions.regulatory requirements.
Fuxing Group could not be reached for comment.
Chinese police and regulators have moved aggressively in recent years to punish alleged market manipulation and insider trading.The China Securities Regulatory Commission issued a record number of fines for such violations last year, breaking the previous record set in 2016.In March this year, the China Securities Regulatory Commission issued 5.5 billion yuan, the highest fine in a single case ever.
Zhu Yidong is the most famous hedge fund manager arrested after Xu Xiang, the head of the daily limit death squad.Xu Xiang was arrested after China's stock market crashed in 2015 and was later sentenced to five years in prison.
China has also stepped up cooperation with foreign governments to track fugitives abroad through Operation Fox Hunt.Fox Hunt is the overseas component of the anti-corruption campaign by the leaders of the Chinese presidency.
Additional reporting by Jia Yizhen
Translator/He Li
