Fugitive tycoon behind HHSC’s shady fundraising network held in Bali

THE fugitive Chinese businessman behind Shanghai HHSC Capital Management, an insolvent investment firm that left a 30 billion yuan (S$5.5 billion) financial black hole, has been arrested by Indonesian authorities and handed over to Interpol.

Lin Qiang, chairman and controlling shareholder of HHSC, was detained shortly after arriving in Bali, according to a briefing by Indonesia’s immigration and police authorities on Thursday (Oct 10). Lin, who fled China 13 months ago, was wanted by Interpol.

According to the Indonesian authorities, Lin is a suspect in an economic crime in China which involved around 50,000 victims with a total loss of 100 billion yuan.

Caixin has learned that Lin fled China in late August 2023 as HHSC’s financial troubles came under scrutiny. In April this year, HHSC announced that it and its affiliates were severely insolvent and halted all payments. Shanghai police then launched an investigation into the company suspecting it was involved in illegal fundraising and arrested seven people.

Lin, 39, had been selling third-party wealth management products since 2012 and had built up a wide sales network through HHSC and its affiliates. Since August 2023, the companies have failed to repay about 30 billion yuan worth of these products. Many of them, as Caixin learned, were sold illegally and lacked underlying assets.

Detained in Bali

According to the Indonesian Directorate General of Immigration, Lin was spotted on arrival at Bali’s Ngurah Rai International Airport on Sep 26. He entered Indonesia using a Turkish passport under the alias “Joe Lin” but was identified by the airport’s facial recognition system. Indonesian border officials confirmed that Lin was the subject of a Red Notice – a request for global law enforcement to arrest a person – and notified Interpol.

The next day, Indonesia received a request from Interpol to arrest Lin. He was detained by Indonesian police on Oct 1 at the airport while trying to leave the country and was handed over to Interpol on Oct 10.

At the handover press conference, Lin, dressed in an orange prison uniform, stood with his back to the flashing cameras. Afterwards, he covered his masked face with both hands as the police led him out.

Caixin learned that after fleeing China, Lin moved between several countries and regions, including Hong Kong, Singapore, Portugal and the United States, while increasingly feeding his gambling addiction. He avoided staying in any one place for any length of time and was held in Bali when he arrived there with his family. It is unclear if they were also detained.

Interpol is expected to extradite him back to China where he will be expected to help in the investigation and risk disposal of HHSC.

However, inspector general of police Krishna Murti, head of Indonesia’s National Police Divhubinter, told reporters no timeline for Lin’s deportation or extradition to China had been set. The first step was to verify whether Lin, who holds a Turkish passport, is a Turkish citizen or if he entered Indonesia using a fraudulent passport, he said.

Financial black hole

According to its website, HHSC, established in January 2016 with a registered capital of one billion yuan, offers a range of services. These include equity and securities investment funds, bill investment funds, real estate funds, overseas asset allocation and family trusts.

In March this year, the company pledged to repay the wealth management products in full, although it was taking time to sell assets and recover funds. But in April, it declared a halt to all payments, saying measures to mitigate its financial problems had fallen short of expectations.

Shanghai police in April detained seven people connected to HHSC, sources told Caixin. They include Lin’s secretary Zhang Chun, the company’s risk control officer Zhang Zhenjie, financial chief Liang Zhiming and the chairman of HHSC’s asset management subsidiary Wang Hongliang.

Ye Gang, financial chief of Shanghai Zhongzhen Transportation Equipment, is also in police custody for business links with Lin. Shanghai Zhongzhen is a subsidiary of the state-owned rolling stock manufacturer CRRC.

Lin fled China as an investigation into Yu Lei, an investment manager at Henan-based and Central China Futures, was underway. Yu was being investigated in 2023 for running a network of 130 financial firms that helped lower-rated local government financing vehicles raise funds through structured bond sales, a practice now banned.

In the process, Yu amassed a fortune of more than one billion yuan in just a few years, sources close to the matter said.

Lin and Yu had been close business partners, with funds raised from HHSC’s wealth management products invested in Yu’s network. Following the probe into Yu, regulators suspended HHSC’s product registration.

Yu killed himself in February at his home in Shanghai, sources told Caixin.

Caixin’s investigation found that since 2018, HHSC and its affiliates have illegally raised funds by issuing and selling asset management products, most of which were unregistered. Sources close to regulators indicated that after the investigation into HHSC, a number of regulatory agencies had launched probes into related institutions and individuals. CAIXIN GLOBAL