CHINA Minsheng Banking Corp finds itself involved in a 3 billion yuan (US$436 million) fraud case as a branch chief of the lender in Beijing allegedly issued false bank acceptance bills and later secure funds from individual investors to cover up the misdeed.
Zhang Ying, the branch head, has been detained by Beijing police, while Xiao Ye, vice head of the branch, is still missing, Caixin magazine reported on its website.
Minsheng said it is assisting the police with an investigation into Zhang, according to its public announcement yesterday, and will “investigate thoroughly the incident and try to recover investors’ funds to the utmost.”
Bank acceptance bills, a form of bank-backed IOU, are commonly used as a form of payment between Chinese companies. The holder of such bills is entitled to cash the bill at a bank under any circumstances. It is different from commercial acceptance bills, which are issued by companies and do not guarantee repayment despite companies’ trustworthiness.
Zhang allegedly helped a corporate client disguise commercial acceptance bills as bank acceptance bills by using a false seal of the bank. The bills were issued by the client to a number of companies, which later discovered the bills were fake, Caixin said.
In order to cover up the fact that the fake bills were not able to be cashed by the bank, Zhang later sold 3 billion yuan of unauthorized wealth-management products to the bank’s private customers to get funds for the client to repay the bills.
Caixin said a huge amount of funds may be transferred between the client and Zhang.