Dai Zhikang, the founder of Zendai Group, a Shanghai-based closely held investment firm, has surrendered himself in connection with a scam linked to peer-to-peer lending, police said over the weekend. Dai, 55, turned himself in on Thursday and said his firm could not make payments due to depositors through its online lending units, Shanghai police said. Assets linked to the case have been frozen and, along with Dai, another 40 people have been detained. A former hedge fund manager, Dai set the firm up in 1992. He surrendered after the abrupt closure of Zendai’s two online lending units valued at 10 billion yuan (US$1.4 billion) last month. The shutdown, which happened alongside a laying off of staff, was the result of a government clampdown and the termination of a partnership with a custodian bank, according to leaked internal Zendai emails. Beijing has been cracking down on the P2P lending sector in recent years, in an attempt to restore order to the troubled industry. Dai is being investigated for illegally accepting deposits from the public, as the two Zendai P2P lending units were not licensed for financial business, police said. He has also admitted to setting up capital pools and embezzling funds during business operations, they added. China shutters two P2P units worth US$1.4b amid crackdown China’s P2P lending sector, meant to help smaller companies and individuals who cannot access bank loans, is now viewed as a major threat to financial stability by regulators, with funds raised from the public either being used for purposes other than those stated at the outset, or misappropriated. Beijing has closed hundreds of P2P firms over the past three years, which led to a drop in the outstanding balance of such loans by about a third last year. In June, Zhang Xiaolei, the founder of once prominent P2P firm Qbao.com, was sentenced to 15 years in jail for involvement in a Ponzi scheme worth, at the minimum, an estimated 50 billion yuan. China fintech giant Lufax to cut P2P lending business Dai, a native of China’s eastern Jiangsu province, has a master’s degree from the financial institute of the People’s Bank of China, as well as a bachelor’s degree from Renmin University in Beijing. He has worked for China Citic Bank, Dresden Bank and a securities brokerage in Hainan, and has also served as president of a fund-management firm. In 2015, Dai and his daughter sold the family’s 42 per cent stake in Hong Kong-listed subsidiary Shanghai Zendai Property to China Orient Asset Management for HK$1.25 billion (US$159.4 million), in a strategic shift away from the city’s overheated property sector. The firm now focuses on businesses ranging from finance and culture to health, according to its website.