Chinese Authorities Swoop on Online Finance Firm in Latest ProbeBloomberg News
Ezubo suspends operations, cites ``inspection,'' Beijing smog
Probe coincides with investigations across finance industry
Chinese authorities swooped on an Internet finance business reported to have attracted billions of dollars from millions of investors since 2014, adding to probes spanning brokers, money managers and regulators.
Ezubo -- the name means easy-to-lease -- is being investigated for alleged illegal operations, the online platform said on Tuesday. The platform and its affiliates owned by Jinyirong (Beijing) Internet Technology Co., are suspected of operating illegally in Internet finance, the state-run Xinhua News Agency said on Tuesday.
On Wednesday, Ezubo’s recorded phone message said that it had suspended its services due to “the severity of Beijing’s smog” and a routine inspection by the authorities. “After the inspection is done, we will return to service," the message said. Jinyirong, which is registered in Beijing, couldn’t immediately be contacted for comment.
China’s finance industry faces a wave of probes triggered by a stock rout and an expansion of President Xi Jinping’s campaign against corruption. Those under investigation include executives at Citic Securities Co. and Yao Gang, one of four vice chairmen at the China Securities Regulatory Commission. No comment has been available from those under scrutiny.
The Ezubo platform offered fixed returns on money that it said was channeled to financial leasing businesses. Since starting last year, the venture attracted 4.9 million investors and a cumulative 73 billion yuan ($11.4 billion) as of Dec. 3, Caixin reported, citing the firm’s website, which was no longer accessible on Wednesday.
As of 7 p.m. on Tuesday, investors could no longer add or withdraw money, Ezubo said on its official account on Weibo -- similar to Twitter -- on Wednesday. Suspending operations is to protect clients’ funds and prevent “untrue rumors” from causing panic, it said.
On Tuesday, police raided the business’s offices in Beijing in the morning and Shanghai in the afternoon, Caixin reported. The platform had offered six products with returns from 9 percent to 14.6 percent and maturities from 2 days to 365 days, according to Caixin. The minimum investment was 1 yuan, it said.
After the authorities let peer-to-peer lending explode without regulation, China’s central bank imposed rules in July, including a requirement for the ventures to only act as intermediaries.
China had more than 3,700 online lending platforms as of November, according to Yingcan Group, which tracks the data. A total of 1,157 websites were “problematic” by the end of last month, more than triple the number at the end of last year, the data showed.
— With assistance by Jun Luo