Vanishing boss of $5.1 billion hedge fund casts financial regulations in harsh light

[cyclone]

Vanishing boss of Chinese US$5.1 billion hedge fund casts financial regulations in harsh light
Investors in Shanghai Fuxing rail against regulators in latest scandal to hit mainland China’s financial system

Daniel Ren & Maggie Zhang
PUBLISHED : Friday, 03 August, 2018, 8:30am
UPDATED : Friday, 03 August, 2018, 11:18am

Regulation in mainland China’s financial markets has come under the spotlight again after the disappearance last month of the head of a Shanghai-based hedge fund that has put at risk some 35 billion yuan (US$5.1 billion) of investors’ money.

Zhu Yidong, 36, the chairman of Shanghai Fuxing Group, disappeared at the beginning of July, about five months after China Central Television (CCTV) reported that he had pocketed illicit gains of 600 million yuan by manipulating the stock price of Shenzhen-listed Dalian Insulator Group between 2016 and 2017.

The case is the latest to dog China’s financial system, which has long struggled with lax regulation and corruption. In February the new head of discipline at the country’s central bank blamed a corrupt alliance of “rats and cats” for the lack of order and heightened risk in the system, while the country’s top leadership has vowed to tackle the problem.

“The hedge fund sector is not well regulated,” said Wang Feng, the chairman of Shanghai-based financial service firm Ye Lang Capital. “At least, the regulators and custodian banks should have stepped up oversight on Fuxing’s funds when investigations into its suspicious market manipulations began.”

The Fuxing scandal is set to become the biggest crisis to hit mainland China’s 12.6 trillion yuan hedge fund sector since the arrest in 2015 of Xu Xiang, who was widely known as the mainland’s most successful hedge fund manager. Xu was sentenced to five and a half years in prison and fined 11 billion yuan by an intermediate court in Qingdao for market manipulation in January 2017.

More details in https://www.scmp.com/business/companies/...-financial

[soros]

The chairman at age 36 seems rather young to be head of a hedge fund with 35 Billion yuan in assets.

Normally the assets belonging to investors should be held by a custodian bank acting as the trustee. So I would not expect the investors funds to held in the bank account under the chairman's own name..