On March 17 this year, Xu Shan, the real controller of Shenzhen Qianhai Huineng Financial Holdings Co., Ltd., and his wife Kang Yuanyuan were suspected of illegal fund-raising fraud. Yang Hua, CEO, and Huang Longjun, director of the Wealth Center, were suspected of illegally absorbing public deposits. Shenzhen Futian District people's Procuratorate reported to Shenzhen people's Procuratorate for examination and prosecution.

The Procuratorate reported that from January 2014 to October 2018, Huineng Financial Holdings issued a total of 75 private equity fund products, raising a total of 8.594 billion yuan, returning the principal of investors totaling 5.585 billion yuan, and outstanding funds totaling 2.953 billion yuan, absorbing funds from 1507 investors.

A few days ago, the reporter interviewed Kang Yuanyuan, a major shareholder of Huineng Financial Control, the financial management and sales manager, and several investors. According to the information provided by them, they tried to restore the whole process of Huineng Financial Control from fund-raising, investment, private lending and explosion, and uncovered the whereabouts of nearly 3 billion of the outstanding funds.

Raise money at high interest and borrow the new to pay the old

According to a reporter from the Securities Times, Huineng Financial Control promotes the company's image and financial products mainly through forums, salons, media advertisements and other forms, while financial managers gain investor trust through acquaintances and telephone marketing care. then invite investors to participate in salons, project visits and other investors to allay investors' concerns, and finally throw out high-interest financial products, promising capital preservation and interest preservation, rigid payment. Until investors finally buy wealth management products.

In addition, Huineng Financial Control has also issued a series of equity investment private equity fund products. when selling equity investment products, financial managers also promised that if the investment company could not be listed and could not exit, Huineng would buy back the shares held by investors in cash to ensure the safety of investors' funds, and signed a commitment agreement.

However, on October 22, 2018, Huineng Financial Holdings Xu Shan announced that the company's capital chain was broken and could not be repaid normally, breaking the wealth dreams of more than a thousand investors.

Oddly enough, a month before the thunderstorm, Huineng was still issuing products for project financing. On September 12, 2018, Xu Wenshuang, Huineng financial manager, also offered investors a project with an annual yield of 36%, with a term of 3-6 months.

Xu Shan was still chatting on Wechat on Oct. 16, 2018. "there are several projects you can send now. Try to find a popular style. How about a project that pays the principal and interest on a monthly basis?" Just like a mortgage, there is no precedent in the industry. "

Kang Yuanyuan told reporters, "the company has a total of more than 200 salespeople, and the average commission for salespeople is about 4%. Investors buy 1 million wealth management products and salespeople get a commission of 40, 000, which is relatively competitive in the industry."

How can we cover such a high cost of capital? The way is to borrow the new and return the old. "you need to borrow the new or the old to play this game all the time. If you think about how to support such a high return to your customers, the general investment can not cover such income. Some private equity products have a very short financing period of 3 to 6 months, and the amount of financing is small. The purpose is to be able to complete the fund-raising within a month or two, first circle the money to do the capital pool, and then invest for a long time, which is easy to break the capital chain." Zhao Jun, a former private equity professional, told reporters.

Xu Shan also admitted at the investor meeting on May 20, 2019 that Huineng Financial Control had serious behavior of borrowing the new to repay the old, and that the gap in outstanding funds of Huineng Financial Control was not caused by one year, but accumulated over the past five years, so that the hole became bigger and bigger.

Before the explosion, Huineng Financial Holdings was issuing new fund products every month. So where is the huge amount of money accumulated over the past five years?

Self-financing and self-investment to set up a capital pool

The reporter consulted the financial audit report of Huineng from 2013 to 2018, which showed that the funds raised eventually flowed into Huineng Financial Control Associated Company and personal accounts such as Xu Shan, Kang Yuanyuan, Fu Zhuobin (Xu Shan's brother-in-law), etc., and the one-way capital flow from Huineng Financial Control to affiliated enterprises and individual accounts was as high as 9.09 billion yuan.

"We got the audit report from the finance and found that the funds raised were transferred to the affiliated enterprise account controlled by his family after being transferred to the Huineng account, and the funds raised were diverted to other uses. Xu Shan will withdraw the funds from the outside to complete the payment, and the interest received by some investors will be remitted directly from Xushan's private account. Borrowing the new and returning the old has become an important means for Huineng Financial Control to cover up the fact that funds have been transferred and misappropriated and to maintain fund-raising. " Investor Ding Ning (a pseudonym) told reporters.

The flow of bank funds provided by Ding Ning shows that the investment return interest he received from January to June 2017 was paid from Xushan's personal account. A lawyer told the reporter, "the fund products invested by investors are all special accounts. The funds that pay interest are remitted from Xushan's personal account. On the surface, this is a problem of irregularities, but it reveals that Xu Shan may have the problem of misappropriation of funds or embezzlement. For example, the funds may be through the special account account, through the affiliated company or project to the actual controller's own fund pool account, that is to say, the fund pool account has the problem of raising new or old, and misappropriating funds. "

Xu Shan admitted at the investor meeting that affiliated companies can have close financial exchanges with foreign exchange, and the procedures for borrowing are not complete. " Investor Ding Ning said.

In a recording obtained by the reporter at an investor meeting held by Xu Shan on May 20, 2019, Xu Shan said, "at present, Huineng mainly has three major assets, namely, creditor's rights, equity and property, of which the total loan for debt projects is about 1 billion, and the equity investment is about 360 million yuan. There are also some property income rights." When Xu Shan reported on the whereabouts of the funds at the meeting, he was more likely to lend money to listed companies with liquidity difficulties, or even to individuals to start a business or speculate in stocks, which has not yet been recovered.

As a matter of fact, there are still problems in many projects of Huineng Financial Control. According to a recording evidence held by the reporter, Xu Shan personally admitted on the Rose Garden project at an investor meeting on October 29, 2018 that the Rose Garden project raised a total of 568.8 million yuan and issued three phases of products, but the actual investment in the project was only more than 200 million yuan. the rest of the money is allocated to other projects.

"there is a refund for the Rose Garden project, but the money returned is not used to pay the principal of the investors, but for other projects. Now the problem with the capital chain is really our poor management. In fact, it is not only the Rose Garden project. We also have a mismatch of funds for other projects. I admit once again that there is indeed a mismatch of funds." Xu Shan said.

Shenzhen Securities Regulatory Bureau penalized Huineng Financial Holdings on December 30, 2019. Huineng Financial Control issued 24 private equity fund products, such as Shenzhen Qianhai Huineng Tianyuan No.2 Information Consulting Enterprise (Limited Partnership), which did not go through the filing formalities with the Fund Industry Association. External financing began. In addition to the lack of filing of the products, there was also a serious phenomenon of misappropriation of fund property. Among them, Huineng Shenye calmly Guanlan Rose Garden property M & A Private Investment Fund and Huineng Shenye calm Guanlan Rose Garden property M & A Private Investment Fund Phase II are contractual private equity funds in which Qianhaineng serves as fund manager, raising 150.1 million yuan and 230.2 million yuan respectively, totaling 380.3 million yuan The former Haihui can transfer all the above-mentioned fund property to the bank account of the affiliated company Shenzhen Qianhaineng Tianbao Investment Management Enterprise (Limited Partnership).

It is worth mentioning that Xu Shan frequently transferred the shares of a number of companies controlled by Huineng Financial before the explosion. According to Tianyan survey data, Xu Shan had transferred a number of companies under his actual control before taking the initiative to explode on October 22, 2018, including the transfer of Shenzhen Tianguang Yun Film and Television Media Co., Ltd. in October 2018 and Shenzhen Hechangli Investment Co., Ltd. in June 2018. After the thunder explosion, Shenzhen Yinhe Investment and Development Co., Ltd. was transferred at the end of October 2018 and Shenzhen Nandun Technology Co., Ltd. in December 2018.

The former financial manager of Huineng Financial Control told reporters, "Xu Shan's so-called active solution to this problem has been evading, and finally did not come up with a solution." I asked him on the phone whether the company would fulfill the principal and interest payment as promised after the customer expired, but Xu Shan didn't give me a final answer and hung up directly. In the end, he couldn't even find anyone. "

The straw that crushed Huineng:

Private loan

On April 21, a reporter from the Securities Times contacted Kang Yuanyuan, a major shareholder of Huineng Financial Control: "at that time, General Xu lent money to some enterprises with financial difficulties, and some of them were listed companies, such as Golden Shield shares, as well as young eagle farming and animal husbandry, and so on. He believes that these enterprises have development prospects and repayment ability, which is indeed the miscalculation of General Xu, which led to the capital flow problems of the company behind." Kang Yuanyuan told reporters.

The reporter found that Qianhai Huineng Commercial factoring Co., Ltd., the holding company of Huineng Financial Holdings, lent a total of 30 million yuan to Shenzhen Shangheng Guantong, the largest shareholder in ST continent, in November 2017 and January 2018. As of December 31, 2018, it received a total principal and interest of 41.204 million yuan, and the loan interest was as high as 37%.

On September 7, 2017, Huineng Financial Control signed a "loan contract" with * ST Tianma, which stipulated that Huineng Financial Control would borrow RMB 100 million from * ST Tianma for a period of six months at an annualized fixed rate of 36%. But in the end, the actual loan of 25 million yuan, the loan has been overdue, has not yet been recovered.

In August 2017, Huineng borrowed 50 million to Golden Shield shares, and Golden Shield shares repaid 15 million interest, the loan interest was 30%, and the principal 50 million was not recovered. In May 2017, Huineng lent 72 million to * ST Hi-Tech Co., Ltd., and has not received a refund so far.

"the investment environment has been deteriorating rapidly throughout 2018, and many of the money we lent to listed companies cannot be recovered." Kang Yuanyuan said.

On April 26, 2019, Futian Branch of Shenzhen Public Security Bureau filed a case against Huineng Financial for suspected of illegally absorbing public deposits. On March 17, 2020, suspects Xu Shan and Kang Yuanyuan were suspected of fund-raising fraud. Yang Hua and Huang Longjun were suspected of illegally absorbing public deposits, which was submitted by the Shenzhen Futian District people's Procuratorate to the Shenzhen Municipal people's Procuratorate for examination and prosecution. At present, Xu Shan, Yang Hua, and Huang Longjun are still in custody, and Kang Yuanyuan has been released on bail pending trial. The reason for obtaining bail pending trial is to come out to cooperate with the investigation work of the economic investigation and the payment of funds from investors.

On 23 April, the reporter telephoned the Futian economic investigation police to ask about the progress of the Huineng case. The police handling the case said to the reporter, "at present, the Shenzhen Municipal Procuratorate has returned all Huineng's materials to the Futian economic investigation and asked for some additional materials, but there is no comment on which materials belong to our internal affairs. The general material supplement is limited to one month. You can follow the case report of the Futian Sub-Bureau."

Since the case was filed last year, there will be a long way to go for investors to safeguard their rights.