One of China’s top peer-to-peer (P2P) lending platforms, tuandai.com, collapsed last week, resulting in financial losses for scores of Chinese investors. The platform owners Tang Jun and Zhang Lin surrendered themselves to police on March 27.
P2P allows people to lend to each other while earning high-interest rates—higher than those offered by banks. Firms that operate a P2P platform connect yield-hungry investors with cash-strapped individuals or small businesses.
The first Chinese P2P platform began operating in 2011. Soon, such financial services took on popularity. At its peak in 2015, there were some 3,500 such platforms in China.
But last summer, P2P platforms began shutting down one after the other as platform operators were revealed to have scammed investors. The Chinese authorities’ lack of regulation and oversight had led to rampant fraud.
Tuandai is the latest platform to fold.
Tang Jun founded Tuandai in 2012 as an online lending platform for small business owners to secure financing. Before the crash, it was ranked the 15th largest among all P2P platforms in China.
Publicly available market data revealed that, by Feb. 28 this year, Tuandai had conducted online lending worth 130.77 billion yuan ($19.48 billion), with the total value of loans exceeding 14.5 billion yuan ($2.16 billion). The number of registered users was over 8.36 million, among them more than 220,000 were currently active lenders.
According to Tuandai’s official website, the company had been selected to participate in the provincial government’s pilot project for online financing services, and received numerous industry awards.
Tang Jun is also the actual controller of GuangDong PaiSheng Intelligent Technology Co., a publicly listed company with a market value of more than 20 billion yuan ($2.98 billion).
Tuandai’s sudden crash led authorities to also suspend Tang’s other company from the Shenzhen stock market. Paisheng released a statement on March 28 claiming that it had completely suspended its online financing businesses since the end of last year, and that Tang Jun would no longer hold any positions in the company.
According to a March 28 announcement by police in Dongguan City where Tuandai is based, the platform is being investigated for illegal fund-raising. Tang and co-owner Zhang Lin have been placed under police custody.
China’s P2P industry has experienced a wave of defaults since June 2018. Millions of investors have lost their life savings in fraudulent or failed lending platforms.
Many sought to appeal their cases to the central government, but were repeatedly silenced.
By Olivia Li
From The Epoch Times