In early 2026, after a nearly year-long trading suspension, Lufax Holding (6623.HK) finally disclosed the investigation results of its related-party transaction audit controversy. An official announcement revealed a six-year clandestine operation: from 2017 to 2023, the company disbursed a cumulative total of 3.84 billion yuan in loans through a third-party "shadow company," Shenzhen Decheng Investment, used to acquire the underlying assets of high-risk wealth management products sold on its own platform. This was essentially a "guarantee" to cover losses for investors. The central figure in this controversy is Lufax's founder and former Co-CEO, Gregory Gibb. More notably, the audit firm PwC, previously questioned by the market for "making a mountain out of a molehill," now appears not only justified but exceptionally upright and arguably "wronged."
Timeline: January 2025: Lufax terminated its cooperation with its auditor PwC due to disagreements over "suspected related-party transactions," leading to a suspension of the company's stock trading. January 27, 2026: The company released a quarterly progress update on resuming trading, disclosing supplementary investigation findings and corrective measures.
Core Issues: Suspected use of a third-party channel for concealed risk compensation transactions, failure to disclose related-party transactions as required, and improper accounting treatment.
Key Supplementary Investigation Findings: 1. Massive Loans Directed to a Third Party Counterparty: Shenzhen Decheng Investment Development Co., Ltd. (nominally a non-related party, but effectively a conduit). Amount: Cumulative loans provided from 2017–2023 totaled 3.84 billion yuan. Purpose: Decheng Investment used part of the funds to acquire the underlying assets of risky wealth management products issued on the Lufax platform.
2. True Purpose: Compensating Investors When the related wealth management products incurred losses, compensation payments were made to retail investors through proceeds generated from assets held by Decheng Investment, aiming to protect the platform's reputation. This practice amounted to Lufax assuming implicit guarantee obligations, which were not reflected in its financial reports.
3. Accounting and Disclosure Violations The accounting treatment of the loan transactions did not reflect the economic substance (i.e., the risk was not genuinely transferred). Three controlled entities (including two companies held by Decheng Investment) were not consolidated, leading to incomplete financial information. The company failed to follow the required listing rules procedures for the approval and disclosure of related-party transactions.
The "Star CEO's" Covert Operation: Gregory Gibb Led the 3.84 Billion Yuan "Off-Book Compensation" Arrangement Gregory Gibb, the American executive with a McKinsey background, was once a legendary figure in China's fintech circle. After joining Ping An in 2011, he built Lufax and led its NYSE listing in 2020, with its market capitalization once approaching $50 billion. However, beneath the glamour, a meticulously designed risk transfer mechanism quietly sowed the seeds of crisis. According to Lufax's January 27, 2026 announcement, the investigation confirmed that between 2022 and 2023, the company provided substantial loans to the seemingly unrelated Shenzhen Decheng Investment, which then used the funds to purchase the underlying non-performing assets of wealth management products issued by Lufax's related parties. These products were sold to retail investors via the Lufax platform. If the products defaulted or incurred losses, Decheng Investment would use the proceeds from asset disposals to indirectly compensate investors—essentially an undisclosed implicit guarantee. The announcement explicitly stated: "The former Co-CEO and former CFO were the primary designers and executors of the related transactions." Based on disclosures from media outlets like Damo Finance, this person was Gregory Gibb. As the top executive responsible for strategy and risk control, he chose to bypass board approval and circumvent related-party transaction disclosure procedures, using "protecting the platform's reputation" as a rationale to quietly absorb risks that should have been borne by the company through an off-book channel. This operation, while seemingly "protecting investors," severely violated corporate governance standards for listed companies. It distorted the truthfulness of financial statements—loans were recorded as normal assets without risk provisioning—and deprived shareholders and regulators of the right to know about significant risk exposures. Gibb's sudden resignation in November 2024 for "personal reasons" now appears more like an exit before the storm hit.
PwC's "Whistleblowing" Moment: Not Nitpicking, But Upholding Professional Integrity Initially, PwC was perceived by some market voices as being "overly sensitive" or even "hindering the company's development." In early 2025, Lufax abruptly announced the dismissal of its long-time auditor, citing vague reasons and sparking speculation. However, with the investigation results revealed, PwC's stance is not only justified but stands as a model of audit independence. Disclosures indicate that in October 2024, during an oral communication with Lufax's then-CFO (later identified as Xu Zhaogan), PwC first learned of the suspected related-party transactions. Exercising professional caution, PwC requested the company to initiate an investigation and raised questions about the accounting treatment. However, Lufax's management not only failed to cooperate proactively, but the involved executives later denied having disclosed the relevant information, leading to a complete breakdown of trust. Crucially, while PwC's understanding of the transaction's purpose was slightly off (mistakenly thinking it was "compensating related-party losses"), its core judgment regarding the lack of disclosure, questionable accounting treatment, and significant internal control deficiencies was entirely correct. Faced with the company's perfunctory internal investigation report, PwC resolutely declared that its audit opinions on the 2022 and 2023 financial reports "should no longer be relied upon"—an extremely severe professional warning indicating the auditor could no longer vouch for the reports' authenticity. In the current climate of recurring financial fraud in capital markets, PwC chose not to "turn a blind eye" to retain a client but instead adhered to principles and sounded the alarm promptly. While this led to a sharp drop in Lufax's stock price and its trading suspension in the short term, it ultimately represents the highest form of responsibility towards investors and market integrity in the long run. The so-called "wronged" status stems from the misunderstanding and cost borne for坚守底线 (holding the line).
Systemic Flaws: Why Did the "Guarantee Culture" Persist in a Leading Platform? The essence of the Lufax incident is not merely individual executive misconduct, but a continuation of the "rigid repayment" mindset prevalent in early Chinese internet finance. During the P2P era, platforms commonly promised "principal and interest protection" to attract investors. Even after Lufax transitioned to a loan facilitation and wealth management platform, the unspoken rule of "not letting customers lose money" remained deeply ingrained. The Decheng Investment channel designed by Gibb and others was an institutionalized manifestation of this mindset—using off-book funds to clean up on-book risks. However, a listed company differs from a startup; every significant transaction must be conducted transparently. The HKEX Listing Rules explicitly require that related-party transactions be approved by independent directors and fully disclosed. Lufax not only failed to follow procedures but deliberately concealed control relationships (Decheng Investment and its two subsidiaries were effectively controlled by Lufax but not consolidated), crossing a clear compliance red line. A question worth pondering is why such a large-scale, long-term operation went undetected by internal audit, risk control, or the board of directors. The answer perhaps lies in a culture where "performance is paramount," causing risk control to take a backseat to scale expansion and compliance to become a mere formality. PwC's intervention precisely broke this tacit understanding, forcing the issue into the open. Currently, Lufax has hired Deloitte to overhaul its internal controls, and the new management is focused on resuming trading. But true reconstruction lies not merely in changing auditors or amending charters, but in彻底摒弃 (completely abandoning) the "guarantee" logic and establishing a modern financial governance culture centered on transparency, compliance, and risk assumption.
The Lufax Model Has Ended The Lufax model originated in the tumultuous P2P era. Gregory Gibb was a beneficiary of that era, but Lufax's practices, like other P2P platforms, demonstrate that a model relying on "off-book transfusions" to maintain reputation has reached its end. PwC, the once-misunderstood "whistleblower," will ultimately earn respect for its professionalism and courage. For Lufax to be reborn, it must acknowledge that genuine financial trust is never built by hiding risks, but through openness, truthfulness, and accountability. For Lufax, Gregory Gibb has already resigned. If accountability is to be pursued against Gibb and an explanation given to investors, it is something that must be done now.
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