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Peer2Peer Finance News | July 18, 2019

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China’s P2P fraud trial is underway

China’s P2P fraud trial is underway
Kathryn Gaw

THE FRAUD trial for China’s failed peer-to-peer platform Ezubao has started in Beijing, according to local news reports.

Prosecutors are targeting 26 people who were involved in an alleged online scam costing almost Y60bn (£6.9bn), making it China’s biggest ever case of financial fraud.

The case highlights the dangers associated with unregulated lending. China’s peer-to-peer sector has boomed in recent years, with the value of outstanding loans jumping 153.5 per cent to Y956bn by the end of September – a record high. However, it has also has been riddled with accusations of fraud and high default rates.  Over the past few months, the China Banking Regulatory Commission (CBRC) has begun clamping down on rogue players, identifying more than 1,700 P2P platforms which “have to exit” the market, and setting new rules in place for market lenders.

In October, the CBRC banned all platforms from engaging in asset management activities or marketing high-risk securities, and weeks later it revealed plans to create a detailed registry of every platform in the country.

Ezubao was once China’s biggest P2P lender, until its spectacular collapse in February of this year, when 20 company executives were arrested. There are now 26 people standing trial over the fraud, including ten individuals from Ezubao’s parent companies Yucheng Holdings and Yucheng Global have been charged with fraudulent fund-raising, while the other 16 are facing charges of illegally taking public deposits.

The trial continues.