China’s Crackdown: Private Equity Insider Trading Scandal Leads to a $5.27 Million Penalty

Insider trading in China’s private equity world just got another harsh spotlight, and this time it comes with a massive price tag.

The latest firm to get hit is Shanghai Daoji (Shanghai Daoji 上海道基), which, along with its chairwoman, was slapped with a staggering ¥38.25 million RMB ($5.27 million USD) in combined confiscations and fines.

The chairwoman at the center of the storm, Chen Caiqin (Chen Caiqin 陈采芹), isn’t just any executive. She’s a former Vice President at the well-known PE firm Gaotejia (Gaotejia 高特佳), proving that regulators are targeting experienced players, not just small-timers.

Let’s unpack this high-stakes case and what it signals for investors and founders in the Chinese tech landscape.

Shanghai Daoji Fines & Confiscations (RMB & USD)

Category	Amount (RMB)	Amount (USD)
Illegal Gains Confiscated	9,412,300.00	1,300,000.00
Firm Fine	28,236,900.00	3,900,000.00
Chairwoman Personal Fine	600,000.00	82,800.00
Total	38,249,200.00	5,270,000.00

How a $1.3M “Loss Avoidance” Led to a $5.27M Fine

The Hunan Securities Regulatory Bureau just dropped the hammer on Shanghai Daoji after a thorough investigation.

Here’s the penalty breakdown:

• 💰 Illegal Gains Confiscated: ¥9.4123 million RMB ($1.30 million USD)
• 💸 Hefty Fine for the Firm: ¥28.2369 million RMB ($3.90 million USD)
• 👩‍⚖️ Penalty for the Chairwoman: A personal warning and a ¥600,000 RMB ($82,800 USD) fine for Chen Caiqin.
• Total Damage: A whopping ¥38.2492 million RMB ($5.27 million USD)

So, what was the crime?

Investigators found that Chairwoman Chen Caiqin was in contact with insiders during a “sensitive period” before critical, market-moving information went public.

Acting on this insider information, funds managed by Shanghai Daoji dumped 5.7687 million shares of a company, pulling in ¥23.5002 million RMB ($3.24 million USD) from the sale.

The crucial part? This move allowed them to avoid losses of ¥9.4223 million RMB ($1.30 million USD). The trading activity was so out of the ordinary and perfectly timed with the insider info that it raised immediate red flags.

During the hearing, Shanghai Daoji tried to argue that there was no close relationship with the insider and that the trades weren’t abnormal. The regulators didn’t buy it.

From Gaotejia VP to Insider Trading Scandal: Who is Chen Caiqin?

The executive at the heart of this isn’t a rookie. According to Private Fund Ranking (Simu Paipaiwang 私募排排网), Chen Caiqin has a seriously impressive resume.

• She joined Shanghai Daoji as Chairwoman and legal representative back in July 2014.
• Before that, she spent nearly six and a half years as the Vice President of Gaotejia (Gaotejia 高特佳), a renowned PE firm.
• Her career also includes senior roles at Guotai Junan Securities (Guotai Junan 国泰君安), one of China’s largest investment banks.

Here’s a fascinating twist: Public records from Tianyancha (Tianyancha 天眼查) show that Chen Caiqin doesn’t actually hold any shares in Shanghai Daoji. The firm is owned by three other individuals: Li Lizhen (Li Lizhen 李利珍) (55%), Tian Hailin (Tian Hailin 田海林) (30%), and Chen Qingliao (Chen Qingliao 陈清辽) (15%).

• July 2014 – Present: Chairwoman and Legal Representative, Shanghai Daoji
• ~2008 – July 2014: Vice President, Gaotejia (高特佳)
• Previous Roles: Senior roles at Guotai Junan Securities (国泰君安)

The Warning Signs at Shanghai Daoji

Looking back, the signs of trouble at Shanghai Daoji were there for those paying attention.

• Registration Canceled: In January of this year, the Asset Management Association of China (AMAC) canceled the firm’s registration due to “abnormal operations.”
• Shrinking Capital: The firm twice reduced its registered capital. It went from an initial ¥100 million RMB ($13.80 million USD) down to just ¥10 million RMB ($1.38 million USD).
• Bare-Bones Operation: Tianyancha data shows the firm, while technically still in existence, only has three employees listed as insured. Not exactly a thriving operation.

These details paint a picture of a firm with a rocky operational history, making it a prime candidate for regulatory scrutiny.

• Chen Jialin (Greenwoods Asset Management): Fined ¥21.55 million RMB ($2.97 million USD) for “front-running.”
• Wang Xianpeng (Hangzhou Jiusheng Fund, Saudi Aramco Deal): Fined triple his illegal gains of ¥1.6208 million RMB ($223,670 USD) for insider trading related to Saudi Aramco’s acquisition of Rongsheng Petrochemical.

This Isn’t a One-Off: China’s Regulators Are Targeting PE Insider Trading

This massive fine isn’t an isolated incident. It’s part of a much broader trend of Chinese regulators cracking down hard on illegal activities in the private equity and asset management sectors.

Here are a couple of other recent, high-profile examples:

Case Study 1: The “Front-Running” Pioneer

Chen Jialin (Chen Jialin 陈家琳), a well-known figure who founded the PE firm Greenwoods Asset Management (Shicheng Touzi 世诚投资) in 2007, was busted for “front-running.”

This is where a fund manager uses their knowledge of upcoming large trades to make personal trades first, profiting from the price movement. He was ordered to pay back illegal gains and fined a total of ¥21.55 million RMB ($2.97 million USD).

Case Study 2: The Saudi Aramco Deal Scandal

The blockbuster acquisition of Rongsheng Petrochemical (Rongsheng Shihua 荣盛石化) by Saudi Aramco also had an insider trading scandal brewing beneath the surface.

The China Securities Regulatory Commission (CSRC) penalized four individuals connected to the deal.

Wang Xianpeng (Wang Xianpeng 王仙鹏), then executive president of Hangzhou Jiusheng Fund, was a key figure. He had frequent contact with a board secretary at Rongsheng during the sensitive period. He used eight different accounts (his own, his wife’s, and his parents’) to buy up shares, netting a profit of ¥1.6208 million RMB ($223,670 USD). He was fined triple that amount.

The Bottom Line for Investors and Founders

The message from Chinese regulators couldn’t be clearer: the “Wild West” days are over.

For investors, this means enhanced scrutiny and due diligence are more critical than ever. The operational history and compliance record of a fund manager are just as important as their track record.

For founders and executives, it’s a stark reminder that the cost of unethical behavior is skyrocketing. A quick profit from insider information can lead to career-ending, multi-million dollar penalties.

As China’s capital markets continue to mature, the regulatory microscope on private equity insider trading will only get more powerful.

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References

• 又一私募内幕交易曝光 连带董事长被罚3825万 曾任高特佳副总裁 – 财联社 (Cailian Press)
• Tianyancha Website
• Private Fund Ranking Website (私募排排网)