Giant Zhang's capital in the whirlpool: employees are still at work, and two major doubts have emerged

Economic Observation Network reporter Zou Yongqin At the beginning of the new year, the Shenzhen private equity circle ushered in a small earthquake.

On January 7, Juzhang Capital, which claims to be a "10 billion private placement", said in a "letter" sent to investors that the company's two actual controllers (Lin Shuqing and Gu Jingteng) were unfortunately killed and seriously injured due to an accident, resulting in a temporary stagnation of all the company's investment business; at the same time, the public security economic investigation department and the criminal investigation department have officially intervened in the investigation.

After investigation by the Economic Observer Network reporter, it was found that as of January 11, the employees of Juzhang Capital in Shenzhen and Shanghai were still working; but with the fermentation of the incident, the chaos hidden behind the company, such as false publicity, unqualified overseas investment, and multiple fund products that had not been filed, appeared one by one, and became the focus of market debate.

Shenzhen and Shanghai are still working, but the payment is a mystery

In fact, since Juzhang Capital issued a "letter" on January 7, the discussion of this incident on the Internet has heated up rapidly, and some media have pointed out that the office floor of Juzhang Capital has even been blocked. So, what is the truth of the matter?

In addition, the "Letter" shows that at present, all investment businesses of Juzhang Capital are in a state of stagnation (fund raising, dividend issuance, and product redemption have been suspended); then, can the customer's funds be guaranteed in the future? Can the relevant fund products still function normally? With all the above questions, the reporter decided to go to the office of Juzhang Capital for a field visit.

According to the official website of Juzhang Capital, the company has offices in three major cities in China, namely Shenzhen, China (35th Floor, Shentie Real Estate Building, Southwest Side of Shatou Shennan Xiangmi Interchange, Futian District, Shenzhen, Guangdong Province), Shanghai, China (Room 3001, Shangjia Center, No. 99 Xianxia Road, Changning District), and Kaohsiung, China (4th Floor, No. 205, Dafeng 2nd Road, Sanmin District).

On the afternoon of January 11, a reporter from the Economic Observer came to the Shenzhen Railway Real Estate Building, which is the location of the Shenzhen headquarters of Juzhang Capital, and found that everything was very calm and not as tense as rumored on the Internet. When the reporter entered the building from the first floor, the security guard simply glanced at the Yue Kang code and immediately released it, and did not even ask for information such as the company to be visited and the floor, let alone register the identity information (which is often the standard of high-end office buildings in Shenzhen).

After entering the elevator, just relevant employees pressed the button on the 35th floor (and the 35th floor button could not be used normally as rumored on the Internet). The reporter followed the employee to the 35th floor, as soon as he got out of the elevator, there were security guards guarding the aisle, and behind the aisle was the large LOGO of Juzhang Capital, and there was no front desk staff in the large front desk under the LOGO. After the security guards let the relevant employees enter, they stopped the reporter and said that the entire 35th floor belonged to their giant capital and did not welcome outsiders to visit. The reporter identified him, said that a fair and objective interview can eliminate market misunderstandings, benefit the company's positive image, and hope to contact the front desk staff about the interview procedures. But the security guard said that his company did not have a front desk, and did not welcome outsiders to visit, and sent reporters downstairs by elevator.

The visit to Shenzhen was fruitless, so what about the situation in Shanghai? According to the contact information of the official website, the reporter dialed the telephone number of the Shanghai branch of Juzhang Capital, and consulted the subsequent operation of the company's fund products and the redemption matters as an investor. The staff member who answered the phone took the lead in asking the reporter whether he was a customer in Taiwan, and after receiving a negative answer, he immediately said, "As for the customers in Shenzhen, this can only be decided by the results of the criminal police and the investigation side."

In this regard, the reporter raised further questions: Why does an accident of one or two leaders cause the stagnation and collapse of the entire company's investment business? Such an operating structure is contrary to the advertised international team, can it ensure that the fund can still operate normally in the future? Also, why did the accident of the two actual controllers trigger the involvement of the public security economic investigation department and the criminal investigation department? "All the company's previous investments were responsible for by Mr. Gu, and all the payments were made by Chairman Lin"; the staff member said that now the two actual controllers had an accident, so this situation was created. As for whether the fund has other problems and whether it can continue to function normally, everything should be based on the conclusions of the police, and it is not clear to everyone now.

So, what kind of relationship does the Shanghai company belong to and the Shenzhen company? In this regard, the relevant staff said, "Although we are the same company, our Shanghai side is only a project department (responsible for business development), and we rarely have contact with the Shenzhen headquarters, let alone how these upper leaders operate." But now we're working normally."

So is the business development that the project department is responsible for is fundraising? For this question, the staff did not pay attention; but gave the reporter two suggestions, "If you want to seek how to handle the payment of funds, there are now two ways, one is to contact your salesman, because our company is one-on-one service; the other is to go to the public address of the Shenzhen headquarters, where there are relevant personnel office contact."

The accident of the actual controller has led to the stagnation of the entire investment business, is this the normal operating structure of the current private placement? And will this accident have an impact on the subsequent fund redemption of Juzhang Capital? In this regard, Xiao Zebang, risk control director of Shenzhen Hejun Venture Capital Management Co., Ltd., said in an interview with reporters that general private equity funds are invested through partnership agreements, private equity institutions act as GPs, other investors act as LPs, and general product withdrawals and dividends are exercised by GPs (generally so, depending on the partnership agreement), "As far as the example of Juzhang Capital is concerned, the actual controller of the GP is now having problems and causing the GP to be unable to perform its obligations and rights. Of course, normal payments will be delayed."

At present, the remedy for investors (i.e. LPs) is to convene a general meeting of partners and vote to replace the qualified GP in accordance with the specific provisions of the partnership agreement, and then the new GP will continue to fulfill the payment obligations and exercise the relevant rights. "However, there are still difficulties in practice, mainly focusing on: 1. The conditions for convening a general meeting of partners. 2. Vote on the conditions for replacing the GP. 3. Are there any new institutions willing to undertake. 4. Fund product filing changes (major changes)," Xiao Zebang stressed, the above four items are indispensable, so there is great uncertainty in practice.

He further said that in addition, if the relevant investors have evidence to prove that the money invested has not invested in specific projects, or the relevant investment matters are inconsistent with the original fund product prospectus, the investors can file a civil lawsuit together to claim the return of the investment principal and claim damages.

Double-sided Giant Zhang's Capital: Two mysteries of violations to be solved

What kind of company is Juzhang Capital in the whirlpool? According to the official website of the Asset Management Association of China, the full name of Juzhang Capital is Shenzhen Qianhai Juzhang Capital Management Co., Ltd., which was established on September 23, 2015, and was filed with the Asset Management Association on November 18 of the same year, with the registration number P1027245. As of July 2, 2021, the capital management scale of Juzhang Capital is only 000-500 million yuan, and the institutional type belongs to private equity and venture capital fund managers, while the business types are private equity investment funds, private equity investment FOF funds, venture capital funds and venture capital FOF funds. Among them, the most noteworthy is that Juzhang Capital has only 5 full-time employees, and the nature of the enterprise is actually a domestic-funded enterprise, and it is not a member of the Asset Management Association of China.

In this regard, Chu Yunsheng, who works as a researcher at an investment institution in Shenzhen, told reporters that at present, private fund managers have two kinds of filing registration and membership in the Asset Management Association; filing registration is the most basic and necessary, and applying to become a member requires certain conditions, and is divided into observation members, ordinary members and other categories.

"According to the regulations, private fund managers and financial institutions engaged in private equity asset management business should first apply to become observer members; after becoming an observer member for one year, if the total scale of assets that have been filed is more than 2 billion yuan, or the scale of the venture capital fund that has been filed is more than 300 million yuan, and there is no violation of laws and regulations and the self-discipline rules of the association, they can become ordinary members." Juzhang Capital has been registered since 2015, and until now it has not even been an observer member, there must be problems in it, either the scale is too small, or there are violations of laws and regulations and the association's self-discipline rules," Chu Yunsheng said.

Unlike Juzhang Capital's rudimentary statement in the Asset Management Association, its external publicity is a different version. In the official website, Juzhang Capital said that it "focuses on the investment of listed companies in IPO, refinancing (fixed rights issue), mergers and acquisitions and restructuring, has an international senior investment team, members of which are composed of domestic and foreign banking, securities, auditing, legal and other industry elites, with more than 10 years of experience in international market investment, in the United States, Japan, Taiwan, Hong Kong, Chinese mainland and other markets for many years, familiar with the characteristics and laws of the local market, with a far-sighted international vision, Rich channel resources and primary and secondary market linkage operation capabilities", and announced that it has formed an integrated two-wing layout with Shenzhen radiating the Pearl River Delta and Shanghai radiating the Yangtze River Delta.

The official website also emphasizes that Juzhang Capital has successfully invested in Alibaba, Tuniu, F-Yingli, Xunxiu Industry, China Postal Savings, Yuwen Group and other IPO IPO projects since its establishment, and has achieved good and stable investment returns! The introduction of the Asset Management Association is very different from the promotion on the official website, which is caused by the fact that the Asset Management Association has not updated the information in time, or is there false publicity in Juzhang Capital? This is certainly a problem, but it is not the focus of the current situation. Because of the comparison of Juzhang Capital's promotional materials and its registration information with the Asset Management Association, there have been two obvious violations, the first of which is the qualification for overseas investment.

According to the 2021 semi-annual investment report released by Juzhang Capital, "in the second half of 2021, Juzhang Group will still take Taiwan and Hong Kong as the main investment markets, and actively explore the domestic A-share IPO issuance market and the US IPO issuance market and gradually participate in investment." In the monthly briefing released by Juzhang Capital, it is shown that the company's main investment is around Hong Kong stocks, Taiwan stocks and other overseas new investments; for example, the December 2021 briefing shows that Juzhang Group participated in a total of 3 Hong Kong stocks and 13 Taiwan new stock investments.

According to the current regulations, it is necessary to have QDII qualifications for outbound investment in domestic issuance of products, but from the data of the Asset Management Association, Juzhang Capital obviously does not have this qualification. So, how did he go overseas to invest? In this regard, an industry insider who refused to be named told reporters that in fact, there is a gray routine operation in this regard, that is, the relevant institutions invest in a fake project, and then the fake project will invest the project funds through the underground money bank to the sea.

"Of course, this is illegal, and only some small institutions are desperate to operate like this." In fact, formal institutions, in addition to QDII qualifications, can also make overseas investment through the QDIE channel in Shenzhen. Now as far as Juzhang Capital is concerned, QDII qualification is not there, so whether it is through QDIE or the gray route of the underground bank, this is not easy to say. Since the investigation has been intervened, everyone will sit and wait for the results to come out." The person said.

The second suspect of violation that the market is concerned about is that many products of Juzhang Capital have not been filed. According to the Asset Management Association, Juzhang Capital has established a total of 5 funds since its filing and registration in 2015, of which 4 have been liquidated, and only Shenzhen Juzhanghuizhang Business Management Enterprise (Limited Partnership) is still running, but there are also warnings of abnormal information reports.

However, in the 2021 semi-annual investment report released by Juzhang Capital, it shows that Juzhang Group has set up a total of 28 private equity fund products from 2016 to 2020, and Juzhang Capital is an executive partner. In other words, since 2016, although Juzhang Capital claimed to be registered with the Asset Management Association in its external publicity, it raised funds for products that were not registered.

"Private fund products have not gone through the filing procedures in accordance with the law is a violation of the law, and Juzhang Capital's "hanging sheep's head and selling dog meat" behavior is even worse", Chu Yunsheng told reporters, in recent years, with the rapid development of the private equity industry, industry problems have also occurred frequently, such as non-performance of registration and filing obligations, disguised public fundraising, intricate group operations and other chaos showing an upward trend gradually emerging.

According to the statistics of Tonglian Datadayes!, as of December 30, 2021, there were 24,577 registered private fund managers, 124391 existing private funds, and the scale of funds under management was 19.78 trillion yuan. At the same time, the number of private equity firms that have been punished and lost contact is also increasing, and the Shenzhen area is particularly serious. As of January 11, 2022, the Asset Management Association of China has disclosed 42 batches of 1,461 suspected missing private equity institutions. In the 42nd batch of lists, there are 70 in total, of which 45 are in Shenzhen, accounting for 64%.

In this regard, Chu Yunsheng said that he hopes that the regulatory level (especially in Shenzhen) can appropriately increase the cost of violating the law, otherwise, Juzhang Capital is not the first, nor will it be the last.

At the same time, he also expressed his recognition for the timely intervention of the investigation and criminal police departments, "The accident of Lin and Gu occurred on January 6, and the investigation and criminal police departments have joined hands to intervene that night, if there is no accident, it should be from the two directions of the actual controller's cause of death and Juzhang Capital's suspected economic crimes, and the action is very rapid." If regulators can take this case as a model in due course, it may have a deterrent effect on some private equity chaos. Of course, the result depends on the results of the investigation."

It has been 6 days since I intervened in the investigation on January 6, but what is the progress of the investigation? To this end, the reporter called the Shenzhen Futian Economic Investigation Brigade to understand the further situation. The staff of the Futian Economic Investigation Brigade said, "We are verifying the case of Juzhang Capital, and if you want to report it, you can come over and submit materials."