41 People Arrested in South China for Illegal P2P Lending

By Ryan Gandolfo, May 3, 2019

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Police recently arrested 41 people associated with the infamous Dongguan-based peer-to-peer (P2P) lending platform Tuandai.com, according to Caixin Global.

The company’s co-owners, Tang Jun, Zhang Lin and two others, have been charged with fraudulent illegal fundraising, as well as illegally collecting investor’s deposits, while 37 other suspects were charged with illegally collecting public deposits.

For those unfamiliar with peer-to-peer lending, it’s defined by Investopedia as “a method of debt financing that enables individuals to borrow and lend money without the use of an official financial institution as an intermediary,” basically allowing individuals to sidestep more regulated financial institutions to take out loans or invest savings.

Tuandai.com, formed in 2011 and considered to be one of the first companies to enter the crazed P2P lending market in China, has been under investigation since the company went bankrupt in late March. 

According to a Weibo post by Dongguan Public Security Bureau on April 28, local authorities have confiscated two aircraft and 48 cars and seized 50 real estate properties and two pieces of land linked to the company (are you thinking Wolf of Wall Street? Because we sure are). The local police have also frozen 3,213 related bank accounts as well as RMB3.35 billion in assets.

In early April, thousands of people affected by the platform’s illegal tactics had gathered around the company headquarters in Dongguan to demand their money back, according to South China Morning Post

In 2018, over 1,000 P2P platforms suspended operations as more and more cases were being filed by investors who were duped by these faulty businesses. Many lending platforms have shut down due to their inability to pay back investors, according to Global Times.  

P2P lending in China has gone through a very dramatic rise and fall within just several years. In January 2016, the number of P2P lending platforms operating in China had reached 3,383 with monthly transactions of RMB130 million. According to Technode, crowdlending was seen as an enticing option for individuals because it promised high rates of return within a relatively short amount of time (usually a red flag).

The government began cracking down on the wildly unregulated industry in 2016, as Chinese leaders looked to shrink “a market that spawned the nation’s biggest Ponzi scheme, protests in major cities and life-altering losses for thousands of savers,” according to Alfred Liu in a January 2019 Bloomberg article.

[Cover image via @财新网/Weibo]

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