Police in Beijing and Shanghai detained 10 people on allegations of illegally raising billions of RMB through investment fund products backed by a web of closely held companies disguised as state owned, reported Caixin.
The individuals, detained in May, include legal representatives and senior executives of several companies affiliated with China Railway Supply Chain Group and Zhongtie Zhongji Construction Group, said Caixin sources. Among them, a businessman called Cen Peng, sits at the heart of a web of companies that provided guarantees for each other in fundraising, business registration records showed.
China Railway Supply Chain and Zhongtie Zhongji Construction are among many private businesses that pretend to be state-backed with misleading names or false information to lure investors. Such fake SOEs often confuse investors with an opaque ownership structure that conceals their actual controlling owners, analysts said.
China Railway Supply Chain and Zhongtie Zhongji Constructioncame under public scrutiny in December when investors reported that several privately offered fund products guaranteed by the two companies failed to pay up. The overdue balance of the products, issued by at least four private investment firms, amounted to nearly RMB 4 billion ($575 million).