New | Funds frozen in China P2P cleanup

Chinese authorities have frozen 1.1 billion yuan of funds deposited in Citic Bank by peer-to-peer online financing platform Ezubo as part of an investigation into alleged violations of banking norms and illegal fundraising.

Ezubo chairman Din Ning had been taken into police custody, while probes had been launched on the firm’s operation in Beijing, Shanghai, Anhui and Guangdong, Chinese media Caixin reported on Wednesday. But Caixin removed the Chinese version of the story online soon after its publication. The English version is still on the website.

Ezubo is one of the bigger peer-to-peer lenders, with an investor base of 840,000 involving 71 billion yuan of funds sourced online from across the country.

In an effort to calm investors, the company released a statement online through social media Weixin, saying it would fully cooperate with the authorities in the investigations. But it added it needed to suspend its online operation to “protect” investors from panic withdrawals and maintain platform security.

Since the stock market rout in summer, the People’s Bank of China has been trying to rein in the unregulated world of online peer-to-peer lending. The authorities blame these companies for the highly leveraged bets that pushed stocks to stratospheric levels before the crash.

These entities, which operate in a grey area as they fall through the cracks between banking, securities and insurance regulations, have also witnessed bank runs with alarming frequency.