At first glance, the mainland's plunging stock markets and an official probe earlier this month into activities of Wang Yi , deputy governor of the State Development Bank, bear little connection. In fact, the two developing events are intricately intertwined, with details emerging in the past few weeks painting a sordid picture of the state of the mainland's financial services, characterised by blatant official corruption, rampant insider dealing and a weak regulatory regime. Mainland stock markets have fallen more than 40 per cent since the beginning of this year and about 60 per cent since their peak in October. Tens of millions of mainland investors have bet their pensions and children's tuition money on the markets, driven by the central government directives, but have lost heavily. They still hold out hope that the government will intervene again to bolster the markets, but to their chagrin leaders have shown little sign of obliging. Instead, the government has launched a high-level investigation into Mr Wang and his associates, who wove an intricate web of corruption and patronage involving a number of Shanghai-listed firms. Intense rumours that the inquiry will implicate senior government officials and leading companies have contributed to the stock market's fall in the past few weeks. The probe is significant because it will most likely lead to a leadership shuffle at the China Securities Regulatory Commission and implicate dozens of high-level regulatory officials, prominent businessmen and speculators. According to mainland newspaper reports, Mr Wang was formally detained by the Communist Party's anti-graft investigators on June 8, the day of the Dragon Boat Festival. With his glasses and receding hairline, the 52-year-old official may not look like a dandy, but he is reportedly linked romantically with one of the mainland's leading TV anchors and composed Ode to Shenzhou (China), a symphony which won critical acclaim. He is better known within the mainland's tight-knit community of securities professionals as the black hand behind a number of blatant stock market scandals. He was a vice-chairman of the China Securities Regulatory Commission and its predecessor from 1992 to 1999, and has been the State Development Bank's deputy governor since then. It remains unclear exactly what triggered his detention. According to state media reports, as a deputy governor of the bank he doled out many loans to businessmen who repaid him handsomely in bribes, including one Shenzhen businessman who bought a flat for Mr Wang's girlfriend. Others said he was detained because state auditors found out earlier this year that he approved a 2 billion yuan (HK$2.27 billion) loan to a project in Henan but only 200 million yuan was used for the project. The bulk of the money was unaccounted for. His brother, Wang Lei , was reportedly paid tens of millions of yuan in fees for arranging the loan. But insiders said the probe has focused on his involvement in several serious stock market violations, including the insider trading of Guangfa Securities, the abnormal listing of Pacific Securities and his close links with one of the mainland's leading stock market speculators, Wei Dong , who committed suicide in April. Wei owned Guojin Securities, which was headed by Lei Bo , one of Mr Wang's former secretaries when he was the CSRC deputy chairman. Some mainland business publications have printed details showing that officials from Pacific Securities colluded with officials from the CSRC to circumvent rules and obtain listing status. Relatives and associates of those officials made billions of yuan from the listing. Pacific Securities, managed by a group of former CSRC officials and other financial officials, was floated in Shanghai on the last trading day of last year by swapping shares with a Yunnan firm which was scheduled to delist. The CSRC then used special powers to instruct the Shanghai Stock Exchange to assign a new stock code to Pacific Securities and treat the listing as an initial public offering. Pacific Securities had recorded losses in two of the three years before the listing, clearly contravening regulations which stipulate a company must have three consecutive years of profits before seeking a listing. The reports have revealed that a company controlled by Wang Lei and his sister, Wang Wei, is a founding shareholder of Pacific Securities, owning shares valued at 1 yuan each. Pacific Securities' shares opened at 46 yuan on its trading debut. Insiders said the scale of the fraud indicated that it would not have gone ahead without the consent of top officials from the CSRC and other government departments. A high-level mainland financial official who knew Mr Wang from their college years was reportedly involved in the Pacific Securities scandal. There has been intense speculation that he was also detained but there has been no official confirmation. But one thing is certain: as the investigation deepens, more senior officials will be implicated. Incensed by the blatant nature of the Pacific Securities fraud, President Hu Jintao is believed to have ordered the investigation and taken a personal interest in the progress of the probe. This is not good news for Mr Wang and his associates.