Security & Fraud

Chief Of Fincera P2P Platform Arrested For Illicit Receipt Of Funds

P2P lending

The CEO of lending platform Fincera, Li Yonghui, was arrested on Friday (Dec. 13) in China on suspicion of financial crimes, according to a report by Reuters.

Yonghui is a Canadian national and Shijiazhuang police said he allegedly illegally accepted public funds. Fincera had been one of the biggest peer-to-peer (P2P) lending platforms in the Hebei province, before the industry as a whole was the subject of governmental crackdowns, and many firms had to close.

Police also arrested Fincera’s lawyer, along with several other individuals. 

On Oct. 31, it was reported that Shanghai regulators were ordering more than 40 P2P lenders to get ready to close shop.

Authorities were giving P2P companies time to wrap up their business affairs, but “the ultimate goal is zero on the balance sheet.” Some of the nation’s biggest platforms — Lufax, Dianrong and Madai Finance — were told in recent meetings with Shanghai’s financial services bureau to stop issuing new products, a source said.

China’s P2P sector emerged during a wave of deregulation and operated with little oversight. It was intended to provide loans to smaller borrowers and to give savers access to double-digit yields.

P2P lending fell under scrutiny when President Xi Jinping starting cracking down on financial risk. The sector was plagued by fraud and defaults after having topped $150 billion in outstanding loans.

Some investors who lost money in the sector complained to regulators, and P2P lending started to be seen as a “threat to social stability.”

Scandals also turned a negative spotlight on the P2P sector. Billionaire Dai Zhikang turned himself in to Shanghai police in September in connection with illegal fundraising, and he closed his P2P lending unit Laocaibao.

In July, it was rumored that Lufax, which is backed by Ping An Insurance, was planning to exit P2P due to tougher regulatory issues in China. Sources told Reuters at the time that the company had already started the process of applying for a license in consumer finance. In addition, it was reported that the P2P division’s employees would move to the consumer finance business.

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