China's central bank has issued a warning on the possible financial risks involved in the selling and trading of specialty sneakers, a practice that has apparently been growing in popularity within the country. The People's Bank of China (PBOC) mentioned during a financial briefing that it has become aware of a trading trend involving collectible sneakers that could result in a bubble and investment losses.
The selling and trading of special editions of basketball and running shoes by popular brands such as Nike, Adidas, and Yeezy have resulted in a number of trading activities that have now caught the attention of Chinese regulators. The activities that have been reported include speculative trading, illegal pyramid schemes, illegal fund-raising, and direct or indirect shoe trading.
All of the aforementioned unregulated activities have reportedly resulted in financial fraud that has placed a lot of people's money at risk. Some of the organizers of these types of trading activities have reportedly misused some of their investor's funds, while others outright stole the investments that were made through their various schemes.
According to regulators, there are currently more than 10 online platforms that allow Chinese consumers to trade shoes as if they were listed companies on the stock market. These websites include popular platforms such as Nice, Poizon, SNKRS, and DoNew.
Combined, the sites have a massive amount of trading volume, resulting in large price fluctuations for different specialty shoes. Some sites even have their own indexes for popular sneakers released by global brands, each serving as pseudo mini futures that people can use to invest their money.
Some shoes are apparently even trading at more than 10 or 20 times their original sticker prices on the online platforms. The massive price fluctuations have caused an influx of would-be investors looking to make a quick buck, while some are looking to cash in on huge returns with the large price movements.
As the trading volumes on some platforms increase, some have started to offer other financial services such as easy consumer loans for active traders.
The PBOC has warned the public of the risks involved in investing in these types of platforms. The agency stated that there are currently no safety nets or regulations in place that prevent investors from losing all of their money if the platforms suddenly shut down.
The PBOC also stressed that it has found a clear lack of information transparency on these platforms, which has caused huge concerns.
Apart from its warnings to the public, the PBOC also called on local banks and lenders to pay close attention to these platforms as they could become victims of financial fraud. Financial institutions that are involved in these types of businesses or have deposits or accounts that are directly linked to them have been advised to immediately report any suspicious activities.
