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China impounds assets of troubled metal exchange after arrests

[SHANGHAI] Chinese police have impounded over 70,000 tonnes of non-ferrous metals and other assets of the Fanya Metals Exchange, the local government said, after arresting the company head and others following accusations it was running a multi-billion-dollar Ponzi scheme.

After months of protests, dozens of investigators took over the Kunming-based Fanya exchange building late in 2015, and earlier this year police arrested the head of the exchange, Shan Jiuliang, along with 15 other suspects.

"After a great amount of investigation and collection of evidence, we have basically uncovered criminal facts in the alleged illegal fundraising," the Kunming municipal government said in a statement posted on its website on Wednesday.

It said police had arrested 19 suspects, including Shan, and taken control of more than 70,000 tonnes of nonferrous metals as well as other assets and funds.

Launched in 2011, the Fanya exchange advertised itself as a state-supported organisation aimed at boosting prices of strategic metals mined in China.

It offered an investment product promising annual returns as high as 13.68 per cent and the flexibility to deposit and withdraw money at will.

But it started restricting withdrawals last April, citing liquidity problems.

Last July, hundreds of people protested outside the exchange in Kunming in southwestern Yunnan province, alleging it had lost investments of more than 40 billion yuan (S$8.13 billion) and complaining of government inaction.

Investors had complained last year that regulatory failures allowed the Fanya exchange to operate without a proper license, while many of them assembled outside the offices of the China Securities Regulatory Commission in September saying local authorities in Yunnan had failed to respond to complaints.

Local officials, however, have said they have done their job well.