China detains Shanghai private equity executive as inquiry goes on into alleged insider trading: Xinhua
Xu Xiang, Zexi Investment's general manager, held as two executives of Hong Kong-owned fund arrested after it allegedly used software to earn billions of yuan from irregular futures trades
Chinese police have launched an inquiry into suspected insider-trading at a leading Shanghai private equity company in the latest move in its crackdown into alleged insider trading following this summer’s stock market slump.
Xu Xiang, general manager of Zexi Investment, a well-known Shanghai-based private equity firm, was detained by police on Sunday as part of the inquiry, the official Xinhua news agency said.
His detention came as officials arrested two executives from a Hong Kong-owned fund that allegedly pocketed billions of yuan from irregular futures trades by using software that in some cases took only one second to buy 31 contracts.
Gao Yan, the general manager of Jiangsu-based Yishidun, and its senior executive, Liang Zezhong, were both arrested for allegedly buying and selling futures in prices that deviated from market standards and illegally made more than 2 billion yuan (HK$24 billion), Xinhua said.
Since China’s stocks plunged in mid-June, the country has intensified investigations into market manipulation, which have so far netted journalists, senior executives in brokerages and even securities regulators.
The Communist Party’s anti-graft watchdog, the Central Commission for Discipline Inspection, has sent inspection teams to the country’s top financial authorities, including the central bank and the securities watchdog, after a series of scandals in the sector following the summer’s stock market rout.
Xu, who was also the legal representative of Zexi Investment, allegedly obtained inside information via illegal methods, and was also reportedly involved in insider trading and stock price manipulation, Xinhua said.
Zexi was founded in December 2009 with registered capital of 30 million yuan and more than 2 billion yuan of assets under management.
The net value of funds managed by Zexi Investment was unaffected in July and August, despite the stock market meltdown.
Stocks held by Zexi Investment fell by the 10 per cent daily limit in early trading on Monday morning. Zexi Investment’s website could not be accessed on Monday.
The detentions of Gao and Liang follow a three-month investigation into Yishidun, which was set up in 2012 with joint investment from two Hong Kong-based businesses, which had been launched by two foreign nationals, Georgy Zarya and Anton Murashov.
Yishidun had allegedly used software to purchase as many as 31 futures contracts in one second, Xinhua said.
From early June to early July, the firm made a net profit of more than 500 million yuan, Xinhua reported.
“The company’s trade activities increased the fluctuations in daily trade prices and affected market trade prices and normal trade orders [between June and July],” said the statement, according to Xinhua.
Jin Wenxian, a technical supervisor at Shenzhen-based China Fortune Futures, was also arrested for allegedly helping Yishidun cover up trade details, using software without detection by authorities and transferring funds, Xinhua said.
Additional reporting by Reuters
