An arrest warrant has been issued for a high-profile business executive in China who is involved in peer-to-peer (P2P) lending.
The prosecutor’s office in Suzhou Industrial Park, an area within Jiangsu Province on China’s east coast, said that Peng Xiaofeng, the chairman and CEO of SPI Energy, is suspected of illegally collecting money from investors for an SPI subsidiary company known as Solarbao, according to a report by the state-run news site China.com.
SPI is a China-based firm that provides solar energy to countries around the world, while Solarbao is a P2P energy e-commerce and investment platform.
Three executives at Solarbao—Xia Houmin, Liu Jing, and He Lin—also were charged. According to SPI’s website, Xia is currently the company’s deputy chairman. The two others were identified by China.com as “senior officials” at the company.
Peng is a well-known businessman who became a billionaire at a young age. In 2004, when he was only 29 years old, he owned an exporting company with annual revenue of 1 billion yuan (about $145 million) through selling safety vests, according to an Aug. 13 article by Chinese news portal Sina.
In July 2005, he established a solar company called LDK Solar, which made a splash in 2007 with its IPO at the New York Stock Exchange (NYSE), raising $486 billion, according to LDK’s website. At the time, it was the biggest IPO by a Chinese solar-energy related company.
Peng’s success was short-lived, and LDK soon became heavily indebted as the company expanded. By 2011, the company was saddled with more than 17 billion yuan (about $2.5 billion) in debt. In March 2014, LDK was delisted from the NYSE due to abnormally low stock prices, and Peng filed personal bankruptcy proceedings.
Somehow, Peng found financial support, and by the end of 2014, he became the head of a newly founded company, SPI Energy. And by January 2016, SPI Energy began trading as ADR (American Depositary Receipt, or a negotiable security representing a non-U.S. company) on the Nasdaq Stock Market.
One of SPI’s businesses is Solarbao, which sells solar equipment to investors, then arranges for the equipment to be rented by power-generation stations. In return, power-generation stations pay the monthly electricity bill to the investors for use of the equipment, while Solarbao makes the rental payments to the investors.
Solarbao encountered financial trouble in April 2017, when the company unexpectedly announced that it couldn’t meet the investment maturity schedules to pay its investors due to a delay in receiving solar subsidies from the Chinese authorities, according to Sina.
In China, households and businesses receive subsidies from the government for using electricity generated from renewable sources, including solar panels. Solar-energy companies also receive subsidies for producing the energy.
Then, in April 2017, the company announced that it was lagging on payments totaling 222 million yuan (about $32.2 million) to its 5,746 investors.
The number of affected investors and the amount of delayed payments both quickly ballooned. In February this year, multiple Chinese media reported that Solarbao was able to pay only about 24 million yuan (about $3.5 million) out of the total 631 million yuan (about $91.7 million) in delayed payments. Only 1,313 investors got their payments, with another 9,751 investors still left in limbo.
On the online discussion board of the Sina news portal, many netizens were surprised to learn that Peng hasn’t been arrested yet, given that a year ago, financial problems at Solarbao were already reported.
Solarbao is one among scores of P2P companies that have recently gone downhill.
P2P allows people to lend to each other while earning high interest rates—usually higher than those offered by banks. But many of the P2P platform operators have been revealed as scams or have closed down without explanation. Thousands have since lost their investments and recently took to the streets of Beijing to appeal their cases to the central authorities.