The opening-up of China over the past decades has wrought many changes and challenges to both the business landscape and to Chinese society. Seeking opportunities in this new environment has led some people down new, often lucrative paths, while others have gotten sidetracked along the way.

Consider the trajectory of one People's Liberation Army veteran, whose career went from security guard to billionaire to convicted mob boss.

The Shenzhen unit of China's prosecutor recently indicted Zhang Wei, the controller of A-share-listed financial holding firm China Create Capital Ltd., following the arrest of Zhang and other company executives in April 2019. Shenzhen police alleged the company was run as a "Mafia-style" business. The charges filed against them include gang violence, drug use, illegally absorbing public deposits, fraud and extortion, illegal detention, blackmail and bribery, according to a statement released by the Shenzhen authority.

The disclosure caused the shares of China Create fall 0.39% to close at 5.06 yuan ($0.75) per share last Friday. The company representative said 100% of the company's assets are frozen under judicial order.

From Security to Securities

As an army veteran who came to Shenzhen in 1992, Zhang started his civilian life as a security guard in this China's fastest-growing city, where the newly set up "special economic zone" under China's reform and opening-up policy were attracting a flurry of business opportunities and investment money. Zhang soon abandoned his security beat for financial securities.

Zhang established China Create in 2004 and subsequently set up several subsidiaries, mainly operated under his and his partner Wang Tao's leadership. Their "financial" businesses were registered in categories of internet financing, wealth management, financing guarantee, small-scale loans, asset management and insurance broker.

Crowd-funded Loansharking

One of their most profitable businesses proved to be an online loan platform, entitled "88 Wealth Network." It claimed to be reducing investment risks and becoming an emerging example of "B2C and O2O" business model - where individuals loan money to companies online to offline for profits. 

The business expansion of 88 Wealth Network went so well in 2015 that it even participated in and sponsored the APEC summit of that year, as well as signed an endorsement deal with famous Chinese concert pianist Lang Lang. Zhang said at that time that the company's cumulative assets topped 31.2 billion yuan, and that it had provided services to 76 A-share listed and Hongkong-listed companies. 

Zhang spent 500 million yuan buying a business jet in 2015 and said he would buy an additional five Airbus aircraft to service "high-net worth individuals." 

An Empire In Collapse

Within only two years, his grandiose dreams met with harsh reality. The 88 Wealth Network platform was wound up in February 2017 and had to suspend operations. As of December 2018, there were 8.494 billion yuan of total investments on the platform, but only 4.9 billion yuan of those were reimbursed. 

The Shenzhen prosecutor disclosed Zhang's "financial" companies including the platform were conducting a series of illegal acts, including "threatening and using violence" when asking borrowers for repayments, illegally detaining people and demanding extortion payments from multiple borrowers.  

In April of last year, Shenzhen police arrested a total of 44 suspects in Zhang's company for illegal possession of guns and ammunition, falsifying indictments and other mob-like illegal loan practices.

The absence of the actual controller in office will not make a significant impact upon the company, a China Create representative said at the time Zhang was taken away for the police investigation.

The company reported a net loss of 1.2 billion yuan last year and in the first half of 2020, the operating revenues were down 13% to 717 million yuan. Zhang holds a 94% stake in the company.