Bloomberg ran an odd story:
China Fortune Land Development Co. has “lost contact” with China Create Capital Ltd., a British Virgin Islands-registered firm to which it handed over $313 million in 2018 in hopes of receiving an annual return of 7%-10% through 2022, it said in a filing with the Shanghai bourse late on Wednesday.
Bloomberg did not include China Create Capital's fall from grace in 2019:
China Create has been headed by Zhang Wei, a former PLA officer who now stands accused, along with his employees and partners, of using blackmail, harassment and illegal firearms to help boost the returns on his private equity firm’s investments, according to a government notice.
China Create, branded by Shenzhen police as a “mafia-style gang”, allegedly lured in investors through an online fundraising platform, called “88 Wealth Network” which it started in 2013.
The peer-to-peer (P2P) lending platform listed fake or exaggerated investment projects to collect funds from the public and then loaned the money at illegally high interest rates. To help ensure their returns, the company is said to have threatened borrowers with detention, faked lawsuit documents and incited gang-like confrontations, the Shenzhen public security bureau in a notice dated on April 10.
Established in 2004, China Create owned stakes in at least 10 Hong Kong-listed companies valued at a combined HK$346.8 million (US$44 million) as of March 19, according to annual reports and exchange filings reported by Bloomberg.
Zhang Wei, a towering 46-year-old Heilongjiang native and other China Create executives are now understood to be held in undisclosed locations.
South China Morning Post reported:
The whereabouts of Zhang, who was arrested with 43 other executives of China Create, could not be ascertained.
The arrests are the latest in the Chinese government’s crackdown on crime and corruption in the country's financial system and capital markets.
Business Times reported:
A China Create representative said 100% of the company's assets are frozen under judicial order.
Zhang established China Create in 2004 and subsequently set up several subsidiaries, mainly operated under his and his partner Wang Tao's leadership. Their "financial" businesses were registered in categories of internet financing, wealth management, financing guarantee, small-scale loans, asset management and insurance broker.
There's a good reason Fortune Land lost contact with China Create's Zang Wei as he likely remains in prison. Did any executives remain free to keep the company running?
The absence of the actual controller in office will not make a significant impact upon the company, a China Create representative said at the time Zhang was taken away for the police investigation.
The company reported a net loss of 1.2 billion yuan last year and in the first half of 2020, the operating revenues were down 13% to 717 million yuan. Zhang holds a 94% stake in the company.
None of the above makes sense. How does a former Chinese Army official and security guard qualify to be a corporate controller? Second, most 94% owners run the whole enterprise and chair the board. They don't serve as controller.
The other odd aspect of the story is the role of a senior wealth manager that steered the money to China Create Capital, a Chinese private equity underwriter (PEU):
Fortune Land said one of its offshore units signed an agreement in 2018 to entrust a company called Wingskengo Ltd. to provide wealth management services for the developer, helping the latter buy fixed-income products. As instructed by Wingskengo, Fortune Land transferred $313 million to China Create Capital for wealth management in 2018The Chinese judicial system likely knows where Fortune Land's $313 million went. PEU China Create had the money for a year before all of its assets were frozen. Surely, Wingskengo kept track of the money until the government seized it in its crackdown on crime and corruption.
China allowed U.S. based private equity underwriters so that it could learn the PEU model. .They did so most excellently.
