China's Sichuan Trust Boss Detained Amid Probe into Missing Billions

A Chinese businessman with family links to the eldest son of jailed former security czar Zhou Yongkang has been detained by police investigating the collapse of Sichuan Trust, which was taken over by the provincial government and banking regulator last year amid concerns it couldn't repay 25.3 billion yuan ($3.9 billion) of investors' money, Nikkei Asia reported. Liu Canglong, who controls companies with a combined 54.2% stake in the troubled trust firm, is being held by the public security bureau in Chengdu, the capital of Sichuan Province, on suspicion of misappropriating trust funds, Sichuan Hongda said in a brief statement to the Shanghai Stock Exchange on Monday. Liu is the actual controller of Sichuan Hongda, although Liu is not a director and doesn't hold any official position in the company, according to the statement. Liu controls mining-to-finance conglomerate Sichuan Hongda Group, which has a 32% stake in Sichuan Trust, while a linked company, Shanghai-listed Sichuan Hongda, holds a further 22.2%, public business records show. The two companies were among 19 entities named and shamed by the banking and insurance regulator in May as having committed "significant violations of laws and regulations" as shareholders of banking and insurance institutions, including illegally appropriating trust firms' capital and funds belonging to investors. The China Banking and Insurance Regulatory Commission (CBIRC) has been targeting trust companies as part of a broader campaign to defuse risks, especially stemming from shadow banking, that could spread through the financial system and cause instability. The trust industry has played an important role in shadow banking by providing loans to higher-risk companies and those with difficulty obtaining credit from banks. But the authorities have become increasingly concerned about the potential risks in the once-freewheeling and lightly regulated sector following a series of scandals and defaults involving billions of yuan. Read more.