Details Of Counterfeiting Of Bedrock Net Capital Value: Who Is The Wedding Dress For RMB 5 Billion Assets

"Bedrock made a big picture." Recalling the investment experience in the past four years, Zhang Jing (pseudonym), an investor, said indignantly: "who did the wedding dress for more than 5 billion yuan overseas? The company didn't give any explanation?"

The bedrock in Zhang Jingkou is a well-known private placement company in Guangzhou in the past. It has the aura of "the first private placement in the United States in China" (hereinafter referred to as bedrock capital and Guangzhou bedrock). In August 2018, she subscribed for two private fund products under bedrock capital, namely "Oriental Value Fund No. 11" and "Oriental Value Fund No. 11 private fund phase II", with a subscription amount of RMB 2 million and a term of two years.

"Oriental Value Fund No.11" is a private securities investment fund, the manager is bedrock capital, and the trustee is Guotai Junan Securities. According to the contract, the funds raised by the fund will be invested in the IPO shares of the companies listed on NASDAQ or the main board of the Hong Kong stock exchange through the QDII asset management plan. The supplementary agreement shows that the fund will reach a guarantee agreement with the shareholders of the target enterprise, and the guaranteed party has the right to recover the income from the guarantor (enterprise shareholder).

There are not only head brokers as custodians, but also repo of overseas listed target enterprises. Similar products are sold on behalf of many well-known institutions such as Hengtian fortune, which seems to be "compliant and safe". Why is the net value of the products only 0.254 yuan at the time of liquidation, and if the company has been punished by the regulatory authorities repeatedly, will criminal crimes be involved?

The soul of bedrock capital

Bedrock capital is a private fund management company established in 2015, with a registered capital of RMB 10 million. He Xu is the legal representative, general manager and executive director, with a shareholding ratio of 37.5%.

Bedrock capital investment is mainly concentrated in China capital stock companies which are publicly listed in the United States or seeking to be listed in the United States. There are two private fund managers in Guangzhou bedrock Asset Management Co., Ltd. and Guangzhou bedrock Investment Management Co., Ltd. the types of managers are private securities investment fund managers and private equity and venture capital fund managers.

According to one data, the core team members of bedrock capital include Zou Qizhong, Wu Bin and Huang Minxin, and executive partners he Xu and Zhang Han and Luo Hongze, executive partners.

The three senior partners have been working in many well-known overseas institutions for many years and are quite competent.

Zou Qizhong is a Registered Financial Analyst (CFA) in the United States. He is also a member of the American Investment Management Institute (AIMR) and the Hong Kong Association of financial analysts (HKSFA). He has worked in international investment institutions such as Merrill Lynch and Anderson investment bank. He has led the investment banking business of NYSE and Nasdaq in the United States for more than 20 years, covering IPO underwriting, fixed increase, management buyout and backdoor City, privatization, etc., leading investment cases include Fuji financing, deHer medical, Dr. carbon holding, etc.

Wu Bin is a senior member of the Australian and Hong Kong Society of accountants and a member of the Hong Kong Association of company secretaries. He has served as the Department Manager of the Hong Kong Securities Regulatory Commission and KPMG accounting firms. He has served as CEO, COO and CFO of Hong Kong New World Group, a number of China A-share listed companies and Hong Kong main board listed companies Huawang, Qingdao beer and other well-known companies' capital operation business is one of the record managers of the Fund Association.

Huang Minxin holds a legal professional qualification certificate and is also an arbitrator of Shenzhen Arbitration Commission and a member of Guangzhou Lawyers Association. He once worked in Bank of China London branch. He is good at overseas financing, M & A and restructuring, disposal of non-performing assets, foreign investment and so on. He is familiar with the investment and financing environment of the United States, the European Union, Hong Kong, Russia, ASEAN and other regions.

As for the executive partner, he Xu's career experience is relatively poor. According to the data of the China Foundation Association, he Xu started to work in 2008. From 2008 to 2015, he Xu successively held relevant positions in Guangzhou Jianzhi investment consultant, Guangzhou Kehua venture capital and Guangzhou Weideng investment.

According to the founder of a private equity fund in Shenzhen, investment banks, lawyers and accountants are the standard configuration of an investment institution, with an iron triangle relationship. Judging from the resumes of Zou Qizhong, Wu Bin and Huang Minxin, the allocation of bedrock is quite eye-catching.

Public information also shows that Wu Bin was one of the financial advisers of China Merchants port IPO in Hong Kong, helping it to find cornerstone investors and participate in IPO subscription. After that, the IPO of China Merchants Port Hong Kong was over 300 times oversubscribed, with an increase of more than 200% on the first day. This project has become a typical example of past successful cases of bedrock capital's core team for external publicity.

The holding ring expands rapidly

A brilliant resume is just the first step. After all, the capital market is a place where performance makes its voice.

After bedrock capital was officially established, it began to prepare to issue RMB funds.

The earliest "Oriental Value Fund" is said to be the first fund in China to focus on investment in China's capital stocks. It was listed in the top three of the annual return rate of private equity fund in 2016. In October 2017, the fund withdrew from liquidation, with a cumulative yield of 101.31% in two years.

In addition, "Oriental Value Fund No. 2" and "Oriental Value Fund No. 3" also ranked among the top ten private placement ranking networks and private placement pioneer list.

Not only that, in 2017, bedrock capital publicized to the outside world, and the company entered the Nasdaq market as a cornerstone investor with a total of 4 enterprises. Among them, Jinzheng environmental protection, tiandihui and ruitu ecology all achieved more than 50% increase in share prices on the day of listing.

As a cornerstone investor, station B of bedrock capital investment was listed in the United States in 2018, and its stock price closed at US $11.24 on the day of listing, with a market value of US $3.13 billion. According to the questmobile reports in June and October 2017, station B ranks first among the most popular apps for users under 24 in China.

Rich return on investment and investment in well-known enterprises such as station B make bedrock capital famous in the private sector, and then increase the strength of product issuance, and the management scale grows rapidly.

According to the disclosure of CFA, the number of private fund products registered by Guangzhou bedrock Asset Management Co., Ltd. and Guangzhou bedrock Investment Management Co., Ltd. are 72 and 4 respectively. At the same time, bedrock capital also started the journey of listing.

In 2018, bedrock capital submitted a prospectus to the securities and Exchange Commission (SEC) to raise $70 million. In March 2019, bedrock capital updated its prospectus. According to the prospectus, bedrock capital adjusted the proposed amount of capital raised to $30 million and planned to land on the New York Stock Exchange. As of the first quarter of 2019, the management scale of bedrock capital has increased to 5 billion yuan.

According to the analysis of insiders, a newly established private equity organization can "create" one or two products with the highest income in the industry, which can quickly open up the situation and bring convenience to the subsequent fund-raising. "Every year, some high-tech private equity fund companies will appear on the private placement list, but from a long-term perspective, the investment philosophy of these funds is not mature.

Data fraud whitewash product explosion

The Oriental value fund, whose income doubled in two years, has become a star product of bedrock capital. At the end of 2017, Oriental Value Fund No. 5, which has a duration of two years, was established, with a fund scale of about 800 million yuan. According to the contract, the fund will invest in IPO shares of station B through QDII asset management plan.

In March 2018, station B was listed on NASDAQ in the U.S., with an offering price of US $11.5/share. As of December 2, 2019, station B closed at $17.5/share. This means that if one million yuan was invested two years ago, the return would be 52%.

On December 3, 2019, bedrock capital issued the "due liquidation announcement", which showed that the positions held by the fund had been reduced before the maturity date of the fund, and the product liquidation process was officially started on December 3, 2019. It is estimated that the liquidation will take about 60 working days. According to the announcement of net asset value, the accumulated net value of "Oriental Value Fund No.5" has reached RMB 1.31 when the fund is terminated. Surprisingly, as of April 10, 2020, bedrock capital disclosed that the net value of Oriental Value Fund No. 5 was only 0.3 yuan.

This was just the beginning, and then a lot of bedrock capital's products began to explode.

On March 3, 2021, Guangdong Securities Regulatory Bureau disclosed that from May 2018 to January 2020, Guangzhou bedrock, as the asset trustee of 35 fund products such as "bedrock Oriental value No.5", signed QDII asset management plan and income exchange agreement (hereinafter referred to as OTC target) with securities companies and public fund management companies to invest fund assets in China capital stocks listed in the United States Tickets. In the process of fund net value disclosure, Guangzhou bedrock disclosed false product net value information to investors by tampering with the valuation data of over-the-counter targets, disclosing them in the net value announcement and periodic report after being reviewed by the fund custodian, or directly disclosed on the "private placement network" without the review of the trustee. The above behavior seriously misleads investors to understand the real, comprehensive and accurate investment returns and risks. Based on the comparison between the last false net value and the real net value of each product, Guangzhou bedrock's total virtual increase fund property was 1.827 billion yuan, the average value of net value false increase ratio was 111.09%, and the highest value of net value false increase ratio was 324.65%.

The fund products with false information disclosure records are: Dongfang Value Fund No.5, Dongfang Value Fund No.5 phase II, Dongfang Value Fund No.5 private equity master fund, Dongfang value No.5 phase III, bedrock Dongfang value No.5 phase II, bedrock Dongfang value No.5 phase II, Jiyan Dongfang value No.5 phase III and Dongfang preferred value No.5.

The 21st century economic reporter learned that the product with the lowest net worth at present is Dongfang value No.14, with only 0.167 yuan. The product raised funds from the market by investing in the IPO share of tiger securities. On March 15, tiger securities closed at $22.6, up 220% from the IPO price of $8 in 2019.

Transfer of hidden benefits of underlying assets

Agreement and publicity on the investment B station, tiger securities and other well-known enterprises, but the actual net worth of serious shrinkage, where is the money? According to a number of liquidation reports obtained by the 21st century economic report, the Oriental Value Fund No. 11 and the Oriental Value Fund No. 11 phase II have disclosed the assets that have not been reduced, and both hold Shenwan Hongyuan 2018-023 single asset management plan for overseas securities investment.

However, in the liquidation report, for the assets that have been reduced, the subject of previous positions is not disclosed, and the funds available for liquidation are shown in the bank deposit account.

In the face of a large decline in the net value of several products, bedrock capital explained that since 2019, China's capital stocks have been greatly impacted. Affected by the black swan event such as the global spread of new crown pneumonia, the U.S. stock market has experienced unprecedented four fusions, and the net value of investment targets has fallen sharply.

If it is only the market reason, what is the investment logic of replacing high-quality target?

Chen Da, a former director of overseas investment in a third-party sales agency, once posted in snowball that bedrock capital had invested in station B, but it soon withdrew. Then he bought a pile of waste stocks, which indicated that there might be interest transmission.

As for Chen Da's statement, a senior manager of China capital stock, who once sought cooperation with bedrock, agreed. He said that bedrock raised a large number of funds in the market with the popular China concept stock. Station B and tiger securities are both gimmicks for their external fund-raising. In essence, they are the fund pool mode. They operate in a unified way to raise funds. By manipulating the market value, they can take over the targets held by the maturing funds with the newly raised funds In the cooperation, the capital stock company receives huge profits.

The prospectus submitted by bedrock capital has some introduction on its underlying assets, such as the fund investing in unicorn. Before September 30, 2017, only one fund under this category has completed the minority equity investment in a growing Chinese TMT company. As of the date, the investment return under this category is negative.

In addition, bedrock capital's investments include a call center business process outsourcing service provider, a wastewater treatment company, an environmental protection building materials manufacturer and distributor, a pet video manufacturer, a mobile game publisher and an online vocational education service provider.

According to people familiar with the matter, there is another operation mode: bedrock capital first finds a cooperative company, and then assists it to list in overseas markets such as NASDAQ, and then smoothly flows the raised funds into the overseas market through the custody account to conduct stock price manipulation or market value management to obtain overseas earnings. But in the market downturn period, the product has the risk of huge losses, "take over the most serious loss of funds."

Private equity regulation is increasing

In this case involving 5 billion yuan, in addition to the manager bedrock capital, the trustee Guotai Junan Securities, and the sales agency owner Jinfu are also important related parties.

Article 6 of Several Provisions on strengthening the supervision of private investment funds stipulates that private fund sales agencies and their employees shall not promise to guarantee the principal and guaranteed income to investors directly or indirectly in the process of private fund raising, including no loss of investment principal, fixed proportion loss or promise of minimum income Interest, etc.

"Some private fund managers give private rewards of 2% to 3% of the amount of fund raised by the executives of sales agencies." A person from a sales agency said that in the past, in order to complete the performance of financial managers, the senior managers of sales agencies were involved in the interests, and such violations occurred from time to time. "With the introduction of the norms and relevant systems of the private equity fund industry, the industry environment has been improved."

In this regard, relevant people of Guotai Junan, the trusteeship agency, said in an interview with the 21st century economic news reporter: "after discovering the bedrock related problems, Guotai Junan timely reported to the regulatory authorities, and actively did a good job in safeguarding the interests of investors under the framework of the legal provisions."

Guotai Junan related person further said: "according to relevant regulations, the fiduciary of the fund is the manager, and the net value of the product shall be disclosed by the manager to the investors in a non-public manner, and the authenticity of the data shall be ensured. In this case, Guotai Junan actively performed its duties as a trustee. Since last year, the relevant regulatory authorities have clearly pointed out the illegal issues such as the manager's failure to truthfully disclose the real situation of the underlying investment targets. As for the punishment decision of this case, our company actively supports the ruling of relevant institutions, and hopes that the industry will further improve the legal system, strengthen the punishment of illegal behaviors of managers, and further protect the interests of investors.

In the past few years, with the wild growth of the private equity industry, illegal fund-raising and illegal investment have been rampant, and many investors have paid heavy losses and costs.

The Guangdong Securities Regulatory Bureau issued an administrative penalty of RMB 1.827 billion, misappropriated funds of RMB 600 million, and promised investors the minimum return. He Xu, the legal representative, was given a warning and fined 360000 yuan.

A number of lawyers said that although the total amount is not high, it is already the maximum limit stipulated by laws and regulations.

"The behavior of private fund related responsible personnel to misappropriate customer funds without authorization belongs to the behavior of misappropriating funds in the sense of criminal law, and may constitute the crime of misappropriating funds." Zhu Han, a lawyer from Shengtang law firm, pointed out that "in terms of the subject of punishment, there are already cases showing that the persons investigated for criminal responsibility include the actual controllers."

Moreover, whether the private fund has fulfilled the filing procedure does not affect the determination of relevant crimes.

Another financial lawyer also pointed out to reporters that the false increase of net fund value and misappropriation of funds are suspected of illegal fund-raising, forgery and fraud, misappropriation of assets and other criminal crimes. At the same time, due to the fund manager's violation of laws and regulations resulting in losses, investors have the right to sue the court and claim compensation.

In fact, the regulation of private funds is increasing.

In January this year, the China Securities Regulatory Commission officially issued the "Several Provisions on strengthening the supervision of private investment funds", further clarifying the bottom line requirements for private fund raising and investment, so as to make the private equity industry return to the origin of "private placement" and "investment".

On January 28, the China Securities Regulatory Commission (CSRC) held a 2021 system work meeting. The meeting stressed that it was necessary to accelerate the batch disposal of related risks such as "pseudo private placement", strictly implement the bottom line requirements of private equity funds, establish a risk prevention and disposal mechanism of inter ministerial linkage and central local cooperation, and accelerate the introduction of private placement regulations.

On February 19, CFA issued seven "fines" involving private equity managers such as sanduxinhe, Zhejiang cexin, Shenzhen Guanshi, Ningbo Yongbang, among which sanduxinhe was once a well-known 10 billion private placement.

The report on the work of the government on March 5 pointed out that the regulatory system and development policies of venture capital should be improved.

As we all know, in the financial market, investors are the source and cornerstone of the capital market. Only by protecting the interests of investors can the financial market be full of vitality. For the follow-up progress of bedrock capital case, the 21st century economic reporter will continue to follow up.

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