Jiangxi’s private financing registration institutions in various places have stopped operating, leaving thousands of lenders with nothing to show for their investments. Efforts to seek justice have been fruitless for over two years, with the total amount involved reaching billions of yuan (RMB).
In recent days, a video circulating online showing a large group of people gathered outside the headquarters of a bank in Jiangxi, shouting slogans for their rights, has sparked concern. A bystander who was present at the scene on July 3rd around 9 a.m. told a reporter that the security guards prevented people from approaching to take pictures. According to a lady participating in the rights protection movement, those seeking justice had invested in projects of Nan Chang Private Financing Registration Service Center Limited (referred to as Nan Chang Registration Center) and ended up losing everything.
“One lady had a notebook where she recorded the amounts. She said some people lost tens or even hundreds of thousands of yuan. She also mentioned that Nan Chang Registration had proper documentation, was featured in ‘Jiangnan Metropolis News’, and was endorsed by the city mayor. Now, they suddenly disappeared, so people had to go to Jiangxi Bank,” said the bystander.
It is understood that Jiangxi Bank is the account opening bank for Nan Chang Registration Center. Attempts to verify this incident with Jiangxi Bank by a reporter from Dajiyuan were unsuccessful.
Nan Chang Registration Center, established for nine years, saw widespread defaults in recommended investment products in May, leaving many investors unable to recover their lent funds and owed interest. Currently, the center’s operations have come to a standstill.
The product meltdown of Nan Chang Registration Center affected over 2,200 investors, involving a total amount of approximately billions of yuan. The majority of customers were local residents of Nan Chang, with a significant portion being in the age group of 60-90 years old and investing amounts ranging from 1 to 2 million yuan.
While tracking this incident, Dajiyuan reporters found that not only Nan Chang Registration Center had ceased operations but also Yingtan City’s Registration Center closed on January 28, 2023, for various reasons, leaving investors similarly empty-handed. Several counties and cities in Ji’an City, Jiangxi, had their Registration Centers shut down over two years ago, and all investment products recommended by the centers went bust, with investors having no success in seeking remedies.
It is evident that the private financing registration system in Jiangxi has been significantly crippled.
Private financing registration service institutions are companies or non-enterprise units set up in specific regions to provide comprehensive service trading platforms for financial information dissemination, intermediary services, registration, and other functions for local private lenders and borrowers. As per regulations, each county or district can only establish one such institution, with operations involving registration and release of private financial information, matchmaking of private funds, and recording of private financial lending contracts, all under the strong support of local governments.
Li Hua, a victim of investment in Jiuzhou District, invested several hundred thousand yuan in the platform. She told Dajiyuan that the government had organized events in the local square and had top city officials endorsing the platform, which led her to invest. Despite heavy promotion by the media and television at the time, she never expected to lose every penny with no hope of recovery now.
According to the contracts provided by Li Hua (see below), it states the terms of the private financing loan contract with Jiuzhou District Private Financing Registration Service Limited, involving the lender (Party A), borrower, mortgagee, and intermediary/mortgagee, with the intermediary being Jiuzhou District Registration Center.
The contract explicitly outlines that the borrower borrows private funds from the lender through the intermediary, with the lender transferring the loan to the specified custodian bank of the borrower as a form of payment. The mortgagee provides collateral for the borrower’s loan.
Regulatory provisions authorize the intermediary to monitor the borrower’s use of the borrowed funds in conjunction with the mortgagee to ascertain the borrower’s ability to repay at any time. The borrower must provide relevant information on business operations upon the request of the lender, mortgagee, and intermediary. In case of default by the borrower and mortgagee, all parties authorize the intermediary to designate a fourth party as the creditor assignee for the loan agreement.
From the content and process of the loan agreement, even if there was an issue with the intermediary, it should not affect the transaction between lenders and borrowers. Why then did the suspension of the “intermediary” platform impede the normal operation of private fund lending projects?
Another investment victim in Jiuzhou District, Qin Yang, mentioned that borrowers exploited the platform for fraudulent financing of fake projects and shell companies, some being family-run dummy corporations where the legal representatives were relatives collaborating with corrupt officials to defraud people, especially the elderly.
Li Hua revealed, “Private financing in Jiuzhou District started in 2015. In January 2021, the local government discovered issues and reported them to Ji’an City. At the time, the city government implemented a ‘tight inside and loose outside’ policy, claiming that the matter should not be disclosed, allowing company owners to slowly withdraw, reporting financial conditions to the city finance bureau every three months. However, they not only failed to do any of this but also assisted company owners in transferring assets over 15 months. Eventually, the government labeled them as dishonest individuals (already on the dishonesty list) with no assets. The full-scale meltdown officially occurred in May 2022.”
Li Hua stated that investors have been fighting for justice unsuccessfully for two years and ended up being arrested and sentenced. The authorities have classified the case as illegal fundraising. After the meltdown, the local government organized a severe crackdown on illegal fundraising propaganda event, leading to people smashing the platform’s signboard on-site.
Before the meltdown at Jiuzhou District Registration, 139 individuals received insider information and withdrew loans, causing more unsuspecting people to fall into the trap. Some of these 139 were officials from district-level governments who supported Jiuzhou District Registration. Victims of investment questioned possible issues of interest transfer. Li Hua stressed that it was the common people who suffered the most in the end.
Li Hua lamented, “Not only have we lost trust in the government, but even public officials say they no longer believe in it. They themselves admit they don’t dare speak out in their positions. Now, whatever the government says, we don’t believe it, including financial innovation; no one believes them, they have lost their credibility.”
According to information from investment victims, 634 people in Jiuzhou District are affected, with a total loan amount of 239.72 million yuan. Among them, 359 are retired elderly individuals, accounting for 65.75%. There are 86 people over 70 years old, representing 15.75% of affected lenders, and 23.96% of affected retired elderly individuals. Furthermore, hundreds of people in Jinggangshan City were reportedly affected, involving loan amounts reaching 190 million yuan.
Li Hua mentioned, “There are approximately two to three thousand victims in the entire Ji’an City, spanning tens of thousands of households, as some are under individual names but involve the whole family, with a total involved amount exceeding billions (about 200 million USD). For a tier-five city like ours, this is an astronomical figure.”
Dajiyuan reporters attempted to contact relevant departments such as the Jiangxi Provincial Government and Ji’an City Finance, but all phone calls went unanswered.