BEIJING Dec 26 The fate of a defaulted $45
million Chinese corporate bond sold through an Alibaba-backed
online wealth management platform was thrown into doubt on
Monday, after a bank said letters of guarantee for the bonds
China Guangfa Bank Co Ltd (CGB) said guarantee
documents, official seals and personal seals presented by the
insurer of the bonds "are all fake" and that it has reported the
matter to the police.
The dispute highlights challenges in China's loosely
regulated online finance industry, where retail investors often
buy high-yielding bonds and other assets, expecting them to be
"risk-free" due to guarantees provided by various parties.
At the centre of the latest dispute are 312 million yuan
($45 million) worth of high-yielding bonds issued by southern
Chinese phone maker Cosun Group that defaulted this month.
The bonds were sold through Zhao Cai Bao, an online platform
run by Ant Financial Services Group, the payment affiliate of
e-commerce firm Alibaba Group Holding Ltd.
Ant Financial has asked Zheshang Property and Casualty
Insurance Co Ltd, which wrote insurance on the bonds, to repay
On Sunday, Zheshang Insurance published two documents on its
website that it said were from CGB carrying the bank's official
seals, and that guaranteed Zheshang Insurance policies for the
The letters were issued at CGB's Huizhou branch in December
2014, when the Cosun bonds were sold, Zheshang Insurance said.
On Monday, CGB said the documents were fake and that it had
reported the incident to police as "suspected financial fraud."
The dispute follows instances of financial fraud this year
including forged bond agreements that led to brokerage Sealand
Securities sharing potential losses of up to $2.4 billion. In
May, the government advised banks to be vigilant after several
cases of bill fraud.
Ant Financial on Tuesday said Zheshang Insurance "hasn't any
reason to refuse repayment" which it was obliged to do "within
three days" of default.
On Friday, an Ant Financial spokeswoman told Reuters the
Cosun bond default was "a one in billions incident" on the
CGB did not respond to a Reuters request for comment.
Zheshang Insurance and the Guangdong Equity Exchange, which
issued the bonds, declined to comment. Cosun could not be
reached for comment.
Cosun's bond issuance totals 1 billion yuan, according to
Zheshang Insurance. The insurer's total registered capital is
1.5 billion yuan.
($1 = 6.9496 Chinese yuan renminbi)
(Reporting by Shu Zhang and Matthew Miller; Additional
Reporting by Lusha Zhang; Editing by Christopher Cushing)