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Warning from Illegal Securities and Futures Cases


In order to implement the Awareness Month Activity themed by “Rational Investment, Keep Far Away from Illegal Securities and Futures Trap”, the Company (Huabao) has selected some common cases, aiming to remind investors to keep away from illegal securities and futures traps, so as to avoid being deceived or suffering capital losses.

Case I. Readily believe illegal stock recommendation online, resulting in a loss of RMB 1 million.
Case description: Ms. LI is a senior stock investor. A salesman from one company added Ms. LI on WeChat, then added her in an investment and finance WeChat group, in the name of recommending “stocks of high return” and “limit-up stocks”. Later, under the instigation of the “experts” in the WeChat group, Ms. LI downloaded the “futures transaction software” and transferred her funds to the software for “London crude oil futures” transaction. However, after Ms. LI transferred her funds to the software, she kept losing money, and finally she was cheated of over RMB 1 million. After investigation, the police found that the aforesaid investment platform adopted by Ms. LI is a false transaction software, and her money was defrauded by the cheaters
Risk warning: Some lawbreakers attract investors to join groups with the gimmick of recommending stocks free of charge or with high profit, preach that they could get inside information, deceive investors they are “experts”, and design a variety of routines to induce users to illegal platforms without any qualification for investment deals, to cheat investors of money. Please raise your vigilance for investment deals, and remember to choose “legal institutions, legal products, legal outlets and legal personnel”. Please avoid irrevocable losses for the reason of your greediness.

Case II. Illegal fundraising called as “high-quality project” cheated over 7,200 persons
Case description: Company A stated it was mainly engaged in commission of private equity and internet P2P business, and owns 32 well-decorated outlets and about 1,000 employees. It alleged that it sold private equity products of its related companies on a commission basis, publicly raised funds in the manner of SMS, introduction event, leaflet, etc., committed the investment threshold of RMB 200,000, and an annualized return of 15-20%. However, the investors’ fund flowed to other related companies of Company A, instead of being invested for any project. The illegal fundraising of Company A was disclosed, which involved the fund of RMB 2.1 billion and over 7,200 investors.
Risk warning: Some criminal offenders are engaged in illegal fundraising in the disguise of “private equity”, and cheat investors of their funds by means of committing high return, inventing or exaggerating their investment projects. Investors shall raise vigilance for the investment projects of low investment threshold and high return. Please judiciously choose private equity investment, review the registration and filing information of private equity on the website of Asset Management Association of China, check investment contracts cautiously, and avoid being deceived by false advertising.

Case III. Over-the-counter financing is of high risk and there is crisis behind “big profit”
Case description: Mr. WU began to invest in stocks to kill time since he retired. After he earned some money from such investment, he bragged to his neighbors, but he was very surprised that Mr. WANG who entered the market at the same time had earned much more than him. After consulting Mr. WANG, he was informed that Mr. WANG adopted over-the-counter financing which magnified the earnings. Mr. Wu was also interested in such financing, because he considered it could make money faster. Then, with Mr. WANG’s recommendation, he opened an account with the over-the-counter financing company. He firstly invested in RMB 1 million, with the financing ratio of 1:5, and made some money at the beginning, so he invested in more capital and added the leverage. Unfortunately, due to market fluctuation later, the stocks Mr. WU invested in plunged, and he lost his capital including the previous RMB 1 million. Mr. WANG got the similar results: although he didn’t lose all capitals, yet the financing company had made off with money.
Risk warning: Over-the-counter financing generally refers to the behavior that, without approval by relevant financial supervisors, a financing party pays certain cash or securities as the guarantee to a financing company, then based on certain ratio of the cash deposit or value of guaranty paid by the financing party, the financing company lends funds to the financing party for securities trading. Over-the-counter financing is out of the financial supervision system, so it is featured by low threshold, high leverage, high interest, and high risk, and some financing companies even adopt “virtual market” to be engaged in fraud and other illegal criminal activities, so the supervisors have been taking severe measures against them. Investors shall guard themselves from the high-leverage temptation, make goods efforts in risk control, don’t add leverage blindly, keep far away from over-the-counter financing, and protect their own interests.

To investment in securities and features, investors shall select the legal securities and features business institutions that have been approved by the China Securities Regulatory Commission (CSRC) and have obtained relevant professional qualifications, shall maintain vigilance on “good products” with “almost sure-fire return”, and shall never believe in any false propaganda, e.g. high-interest return, non-risk, etc.. If one investor finds out any illegal securities and features activity, he/she may file a complaint or report it to the local government, securities supervision department, industrial and commercial administration, and public security organ (service hotline of the CSRC: 12386; consulting and complaint hotline for protection of financial consumers: 12363).