China crackdown on fraudulent P2P platforms results in 62 overseas arrests, US$1.5 billion of assets frozen
- A wave of defaults hit the peer-to-peer lending sector in June, which wiped out billions of dollars of savings that retail investors put in
- The implosion sparked widespread public grievance and protests
Chinese police have investigated more than 380 peer-to-peer (P2P) platforms on suspicion of illegal fundraising and frozen assets worth 10 billion yuan (US$1.5 billion), following the dramatic implosion of the once-booming shadow banking sector.
China’s Ministry of Public Security said it had arrested 62 suspects who were operators of fraudulent P2P platforms from 16 foreign countries including Thailand and Cambodia, the state-run news agency Xinhua reported on Sunday.
This was a rare public response by China’s top police authority since a wave of defaults hit the P2P lending sector in June, which wiped out savings worth hundreds of billions of dollars that investors – usually mom-and-pop investors with little financial knowledge – lent through P2P platforms.
This has led to widespread public grievance, displayed in petitions and protests across the country.
In the fallout of the implosion, the number of P2P platforms in China has shrunk to 1,009 in January from 1,872 in May, according to data provider Wangdaizhijia. The amount of unpaid loans lent through the platforms plunged to 765 billion yuan from 1.2 trillion yuan.