China's CSRC Just Flipped the Script on Financial Fraud, Targeting Accomplices for the First Time

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Key Points

The China Securities Regulatory Commission (CSRC) is now holding third-party accomplices equally accountable for financial fraud, a major policy shift.
The first public case involved Yuebo Power, which falsified sales and asset disposals between 2018-2022, leading to proposed fines of ¥30.8 million RMB ($4.24 million USD) for the company and its personnel.
For the first time, the CSRC is penalizing third-party individuals, Mr. Yu and Mr. He, who provided external corporate architecture for Yuebo Power’s fraud, with proposed fines of ¥2 million RMB ($275,000 USD) and ¥300,000 RMB ($41,200 USD) respectively.
This crackdown is part of a broader “full-chain” accountability strategy, targeting not just companies and key individuals, but also “gatekeepers” and external collaborators to dismantle fraudulent “ecosystems.”

China’s top securities regulator is cracking down on corporate financial fraud, but this time, they’re not just going after the companies.

In a major policy shift, the China Securities Regulatory Commission (CSRC or SFC) (Zhengjianhui 证监会) is now holding third-party accomplices equally accountable, sending a massive shockwave through the country’s capital market.

This isn’t just a threat—it’s already happening.

The first public case involves the now-delisted Nanjing Yuebo Power System Co., Ltd. (Nanjing Yuebo Dongli Xitong Gufen Youxian Gongsi 南京越博动力系统股份有限公司), or Yuebo Power (Yuebo Dongli 越博动力) for short.

The Yuebo Power Case: A Deep Dive into the Deception

Investigators uncovered a multi-year scheme at Yuebo Power that systematically misled investors and the market.

Here’s the breakdown of what happened between 2018 and 2022:

Inflated Revenue & Profits: Yuebo Power faked sales of its new energy (Xinnengyuan 新能源) vehicle powertrains.
Fake Asset Sales: The company also pretended to sell off assets to further juice its numbers.
False Reporting: All of this fabricated activity was baked into their official annual reports and other public documents, painting a completely false picture of the company’s health.

The CSRC’s response was swift and severe.

The proposed penalties for the company and its insiders are substantial:

Total Fines: A hefty ¥30.8 million RMB ($4.24 million USD) for Yuebo Power and its responsible personnel.
Market Bans: Two of the key individuals involved are facing an 8 to 10-year ban from the securities market (Zhengquan 证券).

Penalties for Yuebo Power and Insiders
Category	Description	Penalty
Company & Personnel	Yuebo Power and responsible individuals	¥30.8 million RMB ($4.24 million USD) fine
Key Individuals	Two individuals involved in fraudulent activities	8 to 10-year market ban

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The Real Game-Changer: Targeting the “Accomplices”

This is where things get really interesting.

The CSRC didn’t stop with Yuebo Power’s internal team.

They identified and are now penalizing two individuals, Yu and He, who provided the external corporate architecture to make the fraud possible.

These two used multiple companies under their control to help Yuebo Power run its fraudulent business activities, essentially acting as willing partners in the deception.

For the first time, the regulator is holding these “accomplices” directly accountable for their role in the scheme.

Mr. Yu is facing a proposed fine of ¥2 million RMB ($275,000 USD).
Mr. He is facing a proposed fine of ¥300,000 RMB ($41,200 USD).

Third-Party Accomplice Penalties

Mr. Yu: ¥2 million RMB ($275,000 USD) fine
Mr. He: ¥300,000 RMB ($41,200 USD) fine

This signals a huge shift from simply punishing the company to dismantling the entire fraudulent “ecosystem.”

Any suspected criminal activity will also be handed over to public security for potential prosecution.

Inside the CSRC’s “Full-Chain Accountability” Playbook

The CSRC has called financial fraud a “cancerous growth” that undermines the very foundation of the market.

This crackdown isn’t a one-off event. It’s part of a broader, more aggressive strategy known as “full-chain” accountability.

While the primary focus remains on the companies committing fraud, the CSRC is widening its net to include:

Key Individuals: Actual controllers, controlling shareholders, directors, and senior execs.
“Gatekeepers”: Sponsors, auditors, and legal firms who are supposed to prevent this from happening but fail in their duties.
Third-Party Collaborators: As seen in the Yuebo Power case, anyone who actively assists in the fraud.

CSRC’s “Full-Chain” Accountability Targets

Companies: The primary entities committing fraud.
Key Individuals: Actual controllers, controlling shareholders, directors, and senior executives.
“Gatekeepers”: Sponsors, auditors, and legal firms failing in their preventative duties.
Third-Party Collaborators: Individuals or entities actively assisting in fraudulent activities.

This approach was formalized in June of last year when the CSRC, along with the Ministry of Public Security (Gong’anbu 公an部) and the Ministry of Finance (Caizhengbu 财政部), issued new guidelines to create a comprehensive system for preventing and controlling financial fraud.

The message is clear: if you’re involved at any level, you’re a target.

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What This Means for Investors and the Future of China’s Capital Market

For investors, founders, and anyone operating in the Chinese market, this is a critical development.

The CSRC is committed to a multi-dimensional attack on fraud, using a mix of administrative, civil, and criminal penalties.

They’re openly following a dual approach: “pursuing the principal offender” and “striking the accomplices.”

The goal is to completely break down the illicit interest chains that allow these schemes to flourish.

However, there’s also a carrot to go with the stick.

The CSRC has stated that for accomplices who proactively cooperate with investigations, rectify their actions, or demonstrate meritorious conduct, they will apply a policy of leniency, potentially reducing or even waiving penalties.

This strategic move is designed to encourage whistleblowing and break the codes of silence within these fraudulent networks.

Ultimately, by pursuing every planner, organizer, and collaborator, China’s CSRC is making its most aggressive move yet to clean up its capital markets and deter financial fraud accomplices.