Compiled from: NetEase News
 
Case review
On August 26, the Futian Branch of the Shenzhen Public Security Bureau issued a case update on Shenzhen Xitou Financial Services Co., Ltd. (the "Xitou.com" platform). With approval from the Futian District People's Procuratorate, platform shareholder Huang was arrested on August 18, 2021.

 
 

The notice stated that on August 11, 2021, police submitted requests for the arrest of three individuals—platform shareholders Huang and Gu, and senior executive Zhang. With approval from the Futian District People's Procuratorate, Huang was formally arrested on August 18, 2021. Police once again urged relevant borrowers in this case to fulfill their repayment obligations, promptly repay the principal and interest, and transfer the funds to the designated repayment account for the "Xitou.com" online lending platform case, noting the repayer's name and purpose.
 
The notice shows that, as preliminarily confirmed by forensic appraisal, the platform's suspension date was February 28, 2020, with lenders' outstanding principal difference between deposits and withdrawals amounting to approximately 662 million yuan, involving 5,635 individuals. As preliminarily verified by an accounting firm, the platform has repaid approximately 659 million yuan to lenders, involving 6,068 individuals. The police are assisting the accounting firm in further verifying the discrepancies between the two sets of data. The case is currently under further processing.
 
Previously, according to a notice from "Futian Police" on July 15, due to suspected illegal absorption of public deposits, police took criminal coercive measures against three individuals—platform shareholders Huang and Gu, and senior executive Zhang—on July 13, 2021.
 
 
Relevant legal provisions
Article 176 of the Criminal Law of the People's Republic of China: Crime of Illegally Absorbing Public Deposits
Whoever illegally absorbs public deposits or does so in a disguised form, disrupting financial order, shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall also, or shall only, be fined not less than 20,000 yuan but not more than 200,000 yuan; if the amount is huge or there are other serious circumstances, the sentence shall be fixed-term imprisonment of not less than three years but not more than ten years, and a fine of not less than 50,000 yuan but not more than 500,000 yuan.
 
If a unit commits the crime in the preceding paragraph, the unit shall be fined, and the directly responsible supervisors and other directly responsible personnel shall be punished in accordance with the provisions of the preceding paragraph.
 
Article 81 of the Commercial Bank Law
Anyone who establishes a commercial bank without approval from the banking regulatory authority of the State Council, or illegally absorbs public deposits or absorbs public deposits in a disguised manner, if constituting a crime, shall be investigated for criminal liability in accordance with the law; and the banking regulatory authority of the State Council shall ban such activities.

 

 
[1] The author's perspective
As early as 2014, P2P platforms emerged like mushrooms after rain, with various platforms using a wide array of promotional tactics, investing huge sums in advertising through elevator ads, online ads, and numerous marketing accounts. To compete for users, their slogans became increasingly exaggerated. However, Huang Sheng, the founder of Xitou.com, was somewhat different. He built a massive fan base by sharing financial knowledge and cleverly converted these fans into users of Xitou.com, saving huge advertising costs. Moreover, these fans, trusting Huang Sheng, had an extraordinary level of trust in Xitou.com.
 
But in 2017, some P2P platforms began to collapse. When people realized the problems with P2P platforms, the industry faced an unprecedented crisis. Yet at that time, reports still claimed that Xitou.com had achieved profitability in 2017, with profits exceeding 10 million yuan, and had maintained a break-even balance in previous years while continuously expanding into new markets. Amid these smoke screens, Xitou.com survived for a few more years. However, with the latest police notice, it has become a fact that Xitou.com, once touted as growing against the trend, has collapsed.
 
The crime of illegally absorbing public deposits is mainly characterized by absorbing funds from unspecified members of the public without approval from the People's Bank of China, either under the guise of absorbing public deposits or not, issuing certificates, and promising to repay principal and interest within a specified period, thereby disrupting financial order. It can be seen that this not only disrupts the national financial savings order but also harms the national financial credit order. Although China's economy is developing rapidly and enterprises are growing quickly, the faster the pace, the more important it is to hold the steering wheel steady; otherwise, once derailed, it harms not only oneself but also the entire society.