The China Banking and Insurance Regulatory Commission publicly condemned the Nasdaq-listed Kingold for the first time, describing risk management at the financial institutions involved as «empty shells».
«A number of banking, insurance and trust institutions were involved in the Wuhan Kingold Jewelry fake gold incident, which was gradually disclosed starting in January 2020,” the CBIRC said over the weekend.
Kingold, one of China’s largest jewelers, secured 20 billion yuan ($2.9 billion) in loans from at least 14 financial institutions based on collateralized gold that turned out to be gilded copper. The Wuhan-based firm also secured loan coverage from various insurers including state-owned People’s Insurance Company of China Property and Casualty which is reportedly refusing to cover any related losses.
«Other than the problems associated with the company itself, the incident also revealed that the internal controls and risk management of some financial institutions were empty shells.»
Chinese Exodus
Chinese firms listed in the U.S. have been facing a bad run in the recent year with the Kingold gilded copper fraud following closely on the heels of accounting scandals at Luckin Coffee and TAL Education Group. Concurrently, U.S. officials and the Nasdaq have signaled stricter oversight that is widely expected to lead to Chinese delistings that many anticipate will benefit the Hong Kong market.
Also over the weekend, the Financial Stability and Development Committee, led by vice-premier Liu He, called for zero tolerance and tougher crackdowns against fraud.
