The Continuing Saga of the Fanya Metal Exchange

The ongoing saga of the Fanya Metal Exchange (Fanya) continued last week with the Kunming Intermediate People’s Court levying a fine of RMB 1 billion (about USD 149 million) and sentencing 21 defendants associated with the ill-fated minor metal investment scheme.

Shan Jiuliang, the Chairman and President of the exchange, was sentenced to 18 years in prison for his role in setting up the company, which took money from thousands of investors. According to Caixin.com’s reporting of the sentencing proceedings, RMB 500 million (USD 75 million) of personal property was seized from Mr. Shan and he was hit with a fine of RMB 500,000 (USD 75,000).

Funds collected by the Fanya Metal Exchange were invested in various minor metals including indium, tellurium, gallium, germanium and bismuth. Since the collapse of Fanya in 2014, prices for indium have fallen by roughly 70 percent, while the price of bismuth has dropped by about half.

A number of minor metal markets saw significant price gains between 2012 and 2014, as large quantities of metals were bought and warehoused by Fanya. It is still unclear whether the full amount of inventory claimed by the exchange was recovered during the investigation. Statements by the court during sentencing suggested that investigations were still ongoing and property was still being sought and seized.

Three other companies related to Fanya’s operations were also fined amounts ranging from RMB 5 million (USD 754,000) and RMB 500 million (USD 75 million) for violating national laws regulating financial management and illegally taking public investments. No exact figure has been given for the total value of investments that were taken in by Fanya, but investment products offered by the exchange were sold through various provincial and state banks throughout China.

In sentencing Mr. Shan and Yang Guohong, the judge stated that the two individuals, whether alone or together, took advantage of their position in the company to misappropriate funds.

The court also suggested that assets seized will be paid back in a timely and proportional manner to investors. According to the judge’s ruling, those suffering losses will take precedence, according to the judges ruling.