Chinese police, in cooperation with local authorities in an unnamed foreign country, have arrested Zhu Yidong, a $5 billion hedge fund manager who was charged with market manipulation by China’s securities regulator. Zhu fled the country in June after he defaulted on bank loans and promised payouts to investors.
China Central Television (CCTV) reported that Zhu was arrested late on Wednesday. However, the country that he fled to and where he was arrested is unknown. According to a report from the Financial Times, the China Securities Regulatory Commission (CSRC) ruled in July that he had manipulated the market and therefore banned him from the industry for three years.
Authorities alleged that Zhu, who is the chairman of FX Group based in Shanghai, and his associate used 25 institutional accounts and 436 individual accounts to manipulate the company’s share price. The investigation into Zhu and FX Group began after CCTV reported on the suspected manipulation of the Dalian Insulator Group in January.
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According to business news website Caixin, which cited unnamed sources, Zhu allegedly pledged stock in listed companies as collateral to obtain bank loans. The news outlet also reported that the majority of the money raised through Zhu’s funds went into industries where FX Group was active. This includes the healthcare, property, and rare earths industries.
Zhu’s disappearance in June prompted protestors to gather at the Bank of Shanghai. This is because they believed that the bank had distributed his products. However, the firm said at the time that it hadn’t authorised any of its employees to sell products issued by FX Group.
Chinese financial authorities crack down on market manipulation
Zhu and FX Group were part of a broader move by Chinese regulatory authorities which have been clamping down on market manipulation and insider trading from non-bank financial institutions in recent years.
In 2017, the CSRC broke its 2016 record for the number of fines issued for these type of offences. In March, the watchdog issued its largest fine in history for a single case, which was RMB 5.5 billion ($804.5 million).