2 Billion Explosion Case First Trial Concludes: Xuesong Holdings Fined 1.1 Billion Yuan, Actual Controller Sentenced to Life Imprisonment; Repayment Plan Pending

On the evening of February 10th, ST Snow Development (002485.SZ) announced that the Guangzhou Intermediate People’s Court had publicly sentenced the case involving related parties Xuesong Holdings, the actual controller Zhang Jin, and others for fundraising fraud, illegal public deposit absorption, breach of trust in the use of entrusted property, and obstruction of testimony.

However, ST Snow Development stated that as of the date of this announcement, they have not yet received the relevant judgment document, and the specific results are subject to the judgment issued by the Guangzhou Intermediate People’s Court. On February 11th, ST Snow Development hit the daily limit up, closing at 5.05 yuan per share, marking the third consecutive day of limit-up trading.

Investor Mr. Zhao (pseudonym), who attended the court session, revealed that the Guangzhou Intermediate People’s Court issued a first-instance verdict, sentencing Xuesong Holdings for fundraising fraud and illegal public deposit absorption, with a total fine of 1.1 billion yuan. The actual controller of Xuesong Holdings, Zhang Jin, was sentenced to life imprisonment and had all personal assets confiscated. Other senior executives received fixed-term imprisonment sentences ranging from three and a half to fifteen years, with illegal gains confiscated and fines ranging from 150,000 to 1.1 million yuan.

Currently, the relevant judgment document has not been made public.

Xuesong Holdings Convicted of Fundraising Fraud and Illegal Public Deposit Absorption

Regarding the impact of this case ruling on the company, ST Snow Development stated that as of the date of this announcement, the company’s operations are normal, and the judgments involving related parties and Zhang Jin will not have a significant adverse effect on the company’s daily operations. It will not affect the company’s independence in business, assets, organization, personnel, or finances, nor will it cause major changes in business operations, and there is no harm to the interests of the company and minority shareholders.

The announcement shows that Zhang Jin, aside from being the actual controller of ST Snow Development, does not hold any position in the company. As of the date of this announcement, Zhang Jin does not directly hold shares of ST Snow Development. He holds a total of 378 million shares through Guangzhou Xuesong Cultural Tourism Investment Co., Ltd. and Guangzhou Junkai Investment Co., Ltd., accounting for 69.40% of the company’s total share capital. Of these, 373 million shares are pledged, representing 68.50% of the total share capital; the total shares judicially frozen amount to 373 million, also 68.50% of the total share capital.

Mr. Zhao said that the court session on February 10th only involved one procedural step—reading the verdict, which lasted about 40 minutes. “Participants in the court session were randomly selected investors, some from the Guangzhou surrounding areas, and some from the Yangtze River Delta,” he said.

Mr. Zhao provided a rough record of the verdict, stating that Xuesong Holdings was fined 1.1 billion yuan for fundraising fraud and illegal public deposit absorption, and Zhang Jin was convicted of fundraising fraud, illegal public deposit absorption, and breach of trust in the use of entrusted property.

Legally, the core difference between illegal public deposit absorption and fundraising fraud lies in the intent to illegally possess funds. The former mainly damages financial management order, while the latter involves deception to absorb funds for personal gain, with deeper malicious intent.

“The first-instance verdict not only reflects the principle of proportionality between crime and punishment but also highlights the judiciary’s zero-tolerance attitude toward crimes involving public funds,” he said.

Additionally, Mr. Zhao revealed that the verdict also mentioned that Xuesong Holdings raised a total of 59.6 billion yuan through sales of financial products at the gold exchange, resulting in actual losses to participants exceeding 20 billion yuan by the time of the case. Xuesong Trust, a subsidiary of Xuesong Holdings, engaged in breach of trust in the use of entrusted property, with a fund inflow and return difference of 2.8 billion yuan between two trust plans involved in the case.

“Currently, investors are most concerned about subsequent repayment issues. So far, no repayment plan has been announced,” Mr. Zhao said. The verdict mentions that illegal gains of Xuesong Holdings and the defendants will be recovered and returned to the investors. Seized, detained, or frozen assets involved in the case are to be disposed of accordingly. Efforts will continue to recover other assets that have flowed out as illegal proceeds. Moreover, Xuesong Holdings is responsible for the fund inflow and return difference of the two involved trust plans.

The Fundamental Basis of Large-Scale Financing Trade

Xuesong Holdings was once a major private enterprise in Guangzhou, originally the Jinhua Group, mainly engaged in real estate. In August 2015, Zhang Jin restructured Jinhua Group into Xuesong Holdings and later set a goal of achieving “three trillions”—trillion yuan in sales, assets, and market value. The company had ranked on the Fortune Global 500 list for four consecutive years.

Before the collapse, Xuesong Holdings’ main business segments included the bulk commodities industrial group, bulk commodities supply chain group, chemical industry group, industrial investment group, and Xuesong International Trust. Additionally, Xuesong Holdings invested heavily in acquiring listed companies, such as acquiring QiXiangTengDa for 4.8 billion yuan in 2016 and Xinuo for 4.2 billion yuan in 2017.

Between 2015 and 2019, Xuesong Holdings’ revenue soared from 59.3 billion yuan in 2015 to 157 billion yuan in 2016, reaching 221 billion yuan in 2017, marking its first entry into the Fortune Global 500 at position 361, and ranking among the list for several subsequent years, with 268.8 billion yuan in 2018 and 285.1 billion yuan in 2019.

In 2019, Zhang Jin acquired a 71.3% stake in Zhongjiang International Trust for over 10 billion yuan, becoming its actual controller, and renamed it “Xuesong International Trust.” At that time, Xuesong Holdings also promised to handle overdue projects of Zhongjiang Trust.

However, behind the apparent prosperity lies the fundamental basis of large-scale financing trade. Such financing trade generally involves participants using property rights, accounts receivable, and other financial interests in trade transactions, employing trade, guarantees, and financial tools for short-term financing, aiming to obtain short-term funds or increase credit.

“Financing trade is prone to fictitious business activities to extract funds, fake revenue or profits, and other false behaviors, which are heavily regulated,” he said.

Unlike ordinary trade financing, financing trade involves fabricating trade backgrounds and turning over goods on paper, to borrow funds, profit from interest rate spreads, or exaggerate business performance. It typically involves large amounts, mainly bulk commodities, with upstream and downstream clients possibly controlled by the same actual controller. The main model of the “Xuesong system” is to use so-called “accounts receivable” under trade as underlying assets, channel through various financial exchanges, and sell “financial products” to individuals.

Continuing to Recover Illegal Gains

In April 2021, Xuesong’s financial projects began to default one after another. The underlying assets for these projects were fictitious “accounts receivable” between Xuesong and supply chain trading companies. On January 30, 2022, Xuesong Holdings issued an apology letter, in which Zhang Jin announced that the planned repayment at the end of January could not be fulfilled.

In May 2023, the Huangpu Branch of Guangzhou Public Security Bureau announced details of a case involving Xuesong Holdings’ Guangdong Yuanfang Investment Co., Ltd. and others for illegal public deposit absorption. The notice indicated that the police had taken criminal coercive measures against key suspects including Zhang; relevant case data had been seized and sent for independent appraisal and forensic audit; assets involved had been sealed, detained, or frozen; and the police urged responsible personnel to cooperate actively, return illegal gains, and those who surrendered and confessed could receive lighter penalties.

Since 2024, subsidiaries of Xuesong Holdings in multiple locations have been reported for suspected illegal public deposit absorption, with investors filing complaints and employees being investigated. In July of that year, Guangzhou Procuratorate prosecuted Xuesong Holdings and its subsidiaries for fundraising fraud and illegal public deposit absorption, indicting the company and several management personnel.

In October 2024, the first public trial of the criminal case against Xuesong Holdings was held, with 19 individuals including Zhang Jin and the company itself being prosecuted for fundraising fraud, illegal public deposit absorption, breach of trust, and obstruction of testimony.

Not only these 19 individuals were convicted; reports indicate that on February 10th, in Guangzhou Yuexiu District Court, a first-instance verdict was also delivered in a separate illegal public deposit absorption case involving six Xuesong Holdings financial advisors.

Mr. Zhao said he participated in two joint meetings regarding this case in the first half of 2025, with relevant staff present. During these meetings, he learned that about 1,300 people were involved in accountability, including a large team of financial advisors.

“In the current macro context of promoting high-quality economic development and resolving major risks, courts are legally affirming the validity of relevant contracts, guiding the financial system to return to its original purpose of serving the real economy, and maintaining healthy development of the financial market,” he said.

(Article source: Yicai)