On December 6, 2025, marking the first anniversary of Zhong Yu's imprisonment, Bank of Beijing (601169) disclosed receiving a 4.14 billion yuan investor compensation lawsuit related to Kangde Xin's securities misrepresentation case.
This date carries symbolic weight for Bank of Beijing. Exactly one year prior, Kangde Xin's former controlling shareholder Zhong Yu was sentenced to 15 years imprisonment for his role in the 10-billion-yuan financial fraud case that shocked China's A-share market. While the criminal proceedings concluded then, the financial aftershocks continue.
The lawsuit, filed by individual investors including Hu Juling representing tens of thousands of retail investors who suffered losses before Kangde Xin's delisting, arrives with precise timing. Previous civil claims had been held back pending criminal verdicts and jurisdictional determinations. With Zhong Yu and other key figures sentenced on December 6, 2024, the floodgates for civil litigation have opened.
This 4.14 billion yuan claim isn't the bank's only exposure. Six months earlier in May 2025, Bank of Beijing faced another 5.15 billion yuan lawsuit from Zhejiang Zhongtai Chuangying Asset Management. Combined, these near 10-billion-yuan claims present substantial risk even for a major listed bank.
The 40-defendant roster reveals plaintiffs' strategy: targeting deep-pocketed institutions like Bank of Beijing and its Xidan branch, along with intermediaries including Ruihua Accounting Firm and Hengtai Changcai Securities. With Kangde Xin effectively insolvent, the legal battle now focuses on determining liability among these "gatekeepers" under securities law's joint liability provisions.
The case stems from Kangde Xin's infamous "phantom deposits" scheme. Despite reporting 15 billion yuan cash in 2019, the company defaulted on 1.5 billion yuan commercial paper, exposing the fraud. Investigations revealed a Cash Management Agreement between Kangde Group and Bank of Beijing's Xidan branch that automatically swept subsidiary funds to the parent company while showing false "accrued balances" on statements. Regulators confirmed Kangde Xin's actual account balances were zero throughout 2015-2018.
Zhong Yu, the 75-year-old mastermind behind the scheme, built his empire on lies. Beyond embezzlement, he orchestrated fake export transactions using 15 shell companies, shipping worthless film products abroad while fabricating contracts and signatures. His inner circle included former GM Xu Shu (sentenced to 6.5 years) and CFO Wang Yu (13-year sentence, currently on medical parole).
While Kangde Xin was delisted in May 2021 with shares frozen at 0.2 yuan, its core optical film production assets in Zhangjiagang retain technical value. Under government trusteeship, the facility continues operating and may return to profitability in 2025.
Bank of Beijing maintains the lawsuits won't materially impact profits, arguing it's not the primary liable party. However, regulators had already fined the bank 40 million yuan in 2020 for violations including improper cash management services and false certification letters. As Zhong Yu serves his sentence, Bank of Beijing and other defendants must now answer to investors in court.
Comments