Breaking News: New Developments in the Investigation of Commercial Securities Wealth Management Executive
The case involving Gao Xiang, the General Manager of the Institutional Business Department headquarters of China Merchants Securities, has taken a new turn. Reports indicate that clues in Gao Xiang’s case may lead to a billion-dollar kickback case involving the former market director of the quantitative giant “Magic Square Quantitative,” Li Cheng. Currently, several individuals related to the case have been handed over to the judicial authorities.
On May 30th of this year, it was officially reported that Gao Xiang was suspected of serious violations and was undergoing disciplinary review by the China Merchants Bureau Group Discipline Inspection Commission and investigation by the Zhongshan City Supervisory Commission in Guangdong Province.
Recently, the reasons behind the investigation of Gao Xiang have come to light. According to a report by Sina Finance on the 6th, the investigation revealed a direct link between the case of Gao Xiang and the investigation of Li Cheng, the market director of “Magic Square Quantitative” in November 2024. Between 2018 and 2023, Li Cheng, together with Meng Pengfei, the former General Manager of the Shennandong Road branch of China Merchants Securities, allegedly funneled the trading of Magic Square Quantitative into designated branches using fictitious broker identities, exploiting the brokerage’s system of “40% commission on trading fees” to siphon off performance bonuses totaling 1.18 billion yuan over six years, with over 20 million yuan flowing into Li Cheng’s personal account.
Meng Pengfei was Gao Xiang’s subordinate during his time at the China Merchants Securities Shenzhen branch. Following the aforementioned case, Meng Pengfei reportedly attempted to bribe Gao Xiang, who was then the head of the Shenzhen branch, with 3 million yuan worth of gold to escape punishment. Although Gao Xiang returned the valuables, he was still investigated for suspected malfeasance. Currently, several individuals related to the case have been turned over to the judicial authorities.
On November 20th last year, rumors about an “employee of Magic Square being arrested for involvement in brokerage kickbacks” circulated online. Later verified by Caixin, the employee was identified as Li Cheng, the market director of Magic Square Quantitative.
Experts speculate that quantitative private funds may receive a certain percentage of commissions from brokerages based on trading volume due to frequent trading activities. However, if these commissions are funneled to individuals, it may raise concerns of illicit benefit transfer.
Public information indicates that Magic Square Quantitative is a hedge fund, quantitative fund, and artificial intelligence company headquartered in Hangzhou, Zhejiang Province, established in 2015.
Magic Square Quantitative is known as a leading domestic quantitative private fund, with assets under management reaching over 100 billion yuan in 2021, alongside Nine Gates Investment, Mingwang Investment, and Lingjun Investment, collectively known as the “four quantitative kings”. Of note, Magic Square Quantitative is also the parent company of the large-scale model DeepSeek.
In April 2023, Magic Square Quantitative announced its commitment to focus on artificial intelligence technology, establishing a new independent research organization to explore the nature of AGI, subsequently setting up the company DeepSeek.
On January 20th this year, DeepSeek launched the large model R1, claiming comparable performance to the official version of OpenAI’s O1 model in tasks such as mathematics, coding, and natural language reasoning. However, following a rapid rise in popularity due to low training costs, DeepSeek faced various criticisms for alleged plagiarism of OpenAI’s technology, as well as security vulnerabilities. Several governments and hundreds of companies in countries including Japan, South Korea, the United States, Canada, Italy, Australia, and the Netherlands banned the use of DeepSeek on government and corporate devices. By April, its usage had significantly declined.
During the Baidu AI Developer Conference on April 25th, Baidu’s Chairman, Li Yanhong, mentioned that DeepSeek could only handle single text and lacked the ability to understand audio, images, and multimedia content, describing it as “slow and expensive” with high hallucination rates, making it unsuitable for many use cases.
Furthermore, a senior official from the U.S. State Department previously alleged that DeepSeek was aiding China’s military and intelligence units and attempting to acquire high-end chips restricted by U.S. export regulations through shell companies in Southeast Asia. These actions raised serious concerns in the U.S. about potential violations of export control regulations.
Yasuta Aki’o, Executive Director of the Indo-Pacific Strategic Think Tank, stated on Facebook that DeepSeek has become undesirable globally, attributing it to China’s significant investment in short-term propaganda efforts that create an illusion but ultimately reveal the truth.