A Qianhai-based investment company has defaulted on over 100 investors' investments totaling up to 300 million yuan (US$46.15 million), the Shenzhen Economic Daily reported yesterday.
One investor, going by the alias of Liu Na, invested 2 million yuan into an asset management project in 2014, run by the Golden Eagle Asset Management Co. Ltd. "The salesman told me the annual return rate would be 11 percent if I put 2 million yuan into the investment," Liu said, adding that she considered it a risk-free investment because the company is owned by the State-owned Yuexiu Group.
Another investor, going by the alias of Liu Xin, invested 1.5 million yuan into the project using his savings, because the retiree considered the project low risk. Over 100 investors from Beijing, Guangzhou, Hangzhou and Dongguan were involved in the case, according to the report.
Investors received interest on their investment in 2014, but the company stopped paying in July last year.
Marketing materials from a third-party financial company showed that the estimated capital for the project was 300 million yuan, and the fund would be used to offer loans to a Hebei-based financing company. But the materials provided by another investor revealed that the estimated capital was 600 million yuan, with the funds being used by banks to lend to finance companies.
When asked about the project’s actual capital and where the money was going, Shao Xueyan, the general manager of the company's management department, declined to answer.
The company’s 2015 third-quarter report revealed that the collateral for the project was based on loans to three companies in Hebei, with the loans adding up to 600 million yuan.
“We believe the company was aware that the three companies are all shell firms set up by a real estate developer to get loans,” said one investor.
"One company has borrowed 190 million yuan with a registered capital of only 500,000 yuan, while another company with registered capital of 3 million yuan has received 310 million yuan," the investor said.
"It's apparent that all three companies couldn’t repay the loans and we believe that Golden Eagle didn’t properly assess and supervise our fund."
A Shenzhen-based lawyer named Han Jun said investors should be wary of investment risks in private fund-raising projects. He added that investors should specify repayment deadlines, along with clarifying both sides’ legal responsibility when signing a contract.