Here and in Sunday evening's post, Zhongzhi is referred to as a "wealth manager" but there seems to have been a lot more going on than just portfolio management for your average penta-millionaire.
From Asia Times, November 28:
Wealth management firm faces financial crime probe amid reports executives cashed out before $36.5 billion liability revealed
Top executives of a major Chinese wealth management firm are being probed after the company reported a net liability of up to 260 billion yuan (US$36.5 billion) last week.
Beijing police said over the weekend that they have launched a criminal probe into the wealth management unit of Zhongzhi Enterprise Group, which reportedly manages about 3.72 trillion yuan worth of assets and is regarded as one of China’s largest “shadow banks.”
A person surnamed Jie, who is believed to be a nephew of the firm’s late founder Jie Zhikun, is among those who have been arrested, Chinese media reported on Monday. Jie Zhikun died in December 2021 due to heart disease.
The arrested were accused of being involved in illegal fundraising activities and other suspected crimes.
The police operation was launched a few days after Zhongzhi reported on November 22 total assets of 200 billion yuan and total liabilities of between 420-460 billion yuan, meaning the firm’s net liabilities were somewhere between 220-260 billion yuan.
On Monday, Chinese commentators published a series of articles and videos criticizing Zhongzhi for partnering with some state-owned enterprises (SOEs) and using its reputation to sell wealth products.
They also slammed Jie’s family members and senior executives for cashing in on their wealth product investments before Zhongzhi’s financial problems were reported by the media this summer.
“With a net liability of 220 billion to 260 billion yuan, Zhongzhi is severely insolvent and is having a huge operational risk,” a financial anchor said in her vlog posted on social media on Monday.
“The company said it’s not easy to liquidate its assets, most of which are bonds and equities that are now undervalued. It seems to be telling the public that its net liability may actually be more than 260 billion yuan.”
She says Zhongzhi’s founder and executives built a financial empire by forming partnerships between the firm and SOEs while using the latter’s reputation to raise funds over the past two decades. She says Jie’s family had accumulated as much as 25 billion yuan of wealth during the peak period.
“Zhongzhi said it has lost its direction after the death of Jie in 2021. How could the company blame a dead person after a huge amount of its assets disappeared?” she asked?
“The fall of Zhongzhi may be one of the largest defaults since the establishment of the New China in 1949,” a financial columnist wrote in an article. “The negative impact of Zhongzhi’s collapse may be even bigger than that of Evergrande as Zhongzhi has huge assets under management.”....
....MUCH MORE
