Chinese Hedge Fund Zhejiang Ruifengda Under Investigations Over Suspected Illegal Activities

By Thea Felicity

May 12, 2024 12:56 PM EDT

US Now Considers Sanctioning Chinese Banks Supporting Russia's Ukraine Invasion—Will This Work? — A Chinese bank employee counts new 50-yuan notes with a money counting machine at a bank counter in Hangzhou in China's eastern Zhejiang province on August 30, 2019, as the People's Bank of China issues the newest 2019 edition of the fifth series of the yuan notes.
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China's securities watchdog has investigated Zhejiang Ruifengda Asset Management Co., a local hedge fund, over alleged illegal activities. According to Bloomberg, the hedge fund, managing assets exceeding 3 billion yuan ($469 million), has ceased repayments to investors seeking redemptions, while its controlling shareholder remains unaccounted for.

Most investors affected by Zhejiang Ruifengda's actions are institutions, including securities firms. The report further detailed the case of a private fund that attempted to redeem its investment in March but did not receive approximately 33 million yuan, as the client reported.

The situation escalated as economic crime investigators in Shanghai reportedly sealed off the company's office premises.READ

China's New Laws For Hedge Funds

Now, the situation involving Zhejiang Ruifengda is happening as China implements stricter regulations on hedge funds, per Bloomberg. These new regulations, which were announced recently, aim to increase the minimum level of assets that hedge funds must manage to operate legally.

Specifically, they intend to limit hedge funds' use of leverage (borrowed money) and derivatives (financial contracts derived from an underlying asset).

These measures are scheduled to come into effect on August 1. These regulations aim to improve oversight and compliance within the hedge fund industry by removing or discouraging practices deemed risky or non-compliant with regulatory standards.

With that, the China Securities Regulator Commission (CSRC) has acknowledged the gravity of the situation involving Zhejiang Ruifengda Asset Management Co.

The CSRC has taken steps to address the issue by instructing pertinent agencies to comprehensively examine the hedge fund's operations over suspected illegal and irregular activities linked to the fund.

Efforts to reach Ruifengda for comments outside of regular business hours remained unanswered.