Chinese police have opened a CreditEase investigation into suspected illegal activity at businesses linked to the lending group. Founder Tang Ning and other suspects face criminal compulsory measures as investors seek repayment from financial products that stopped accepting redemptions in May.
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The investigation was announced by Beijing’s Chaoyang Public Security Bureau on October 12. According to their press release, the two controllers were named Tang and Zhao, aged 53 and 51, respectively.
No specific offenses have been outlined, and no formal charges have been laid yet. The investigation into CreditEase continues, and the specific compulsory measures taken against each person have not been revealed yet.
What Is the CreditEase Investigation About?
Police reported that they were investigating potential illegality at companies related to CreditEase. The company, which was founded in 2006, started out as an online lending platform before branching out into wealth management, loan assistance, and fintech. Later, the Chinese government imposed stringent regulations on the peer-to-peer lending sector.
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CreditEase’s case involves an attempt by police to collect evidence from investors and track down related assets. The police have not indicated the number of investors involved, the estimated amount of money lost, or recovered funds.
How Can Affected Investors File Claims?
Chaoyang police are accepting complaints online, via mail, and at local stations. Online complaints must be made through the WeChat account “Ping An Beijing Chaoyang.” Investors should make sure their complaints contain enough information for investigators to find out about the transactions and obligations.
As for the mailed complaints, authorities asked for identity proofs, agreements, bank statements, and wire transfers. Any relevant correspondence may also be submitted. The materials are supposed to get to the unit responsible for investigating economic crimes in Beijing.
Investors have been told not to trust any individual offering faster repayment if some additional payment is required. There is no deadline set in the CreditEase investigation for recovering assets or payments.
Why Did CreditEase Suspend Repayments?
The group ceased redemptions of fixed-income-like investment vehicles on May 22. A letter of apology is said to have circulated via their Ruicheng and Yirenyou apps on October 11, saying that the group faced immense funding pressure in their loaning and wealth management services.
According to CreditEase, their problems were caused by business losses and low-quality assets, and their efforts to finance themselves through sales of assets were futile. They noted that these investments were already in default while their available cash was not enough to service the repayment requests.
Third-party financial experts conducted an initial review after the freeze and discovered that liabilities might surpass the assets. However, no independently verified shortfall was published by the group. Legal experts were not sure about some products’ compliance due to lack of sufficient information.
What Is Yiren Digital’s Connection?
Yiren Digital, a New York-listed fintech firm connected with CreditEase, was asked about its ties to the implicated firms. It stated that the firm’s management was independent of the wealth management operations in a previous statement. There is no wrongdoing by Yiren as revealed by the CreditEase investigation.
The report by Yiren showed a net loss of RMB 449.6 million in its earning release on September 30 and second-quarter income of RMB 890 million, which was a decline of 46% compared to the previous year. Its loan facilitation dropped 69% from the previous year to RMB 6.3 billion.
Its cash and cash equivalents declined from RMB 2.45 billion at March 31 to RMB 1.70 billion at June 30. There were also fair value losses due in part to digital asset and investment holdings. These figures show the performance of its operations and not the asset valuation in the police investigation.
Are Crypto Investments Part of the Case?
CreditEase-linked investment funds previously backed fintech and blockchain companies, including Circle, Matrixport, Figure, and Archax. However, these historical investments do not confirm current ownership or establish whether any holdings are available to repay affected investors. Police have not identified these companies as targets of the CreditEase investigation.
Cryptocurrency dealings have not been connected to the CreditEase investigation by Beijing police. In addition, the amount of money that will be returned by the Chinese authorities has not been announced yet. For the time being, the main task for the customers is providing records.
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