The parent company of Chinese MMA promotion Chin Woo Men is under investigation by the Guangzhou Municipal Public Security Bureau for “illegally absorbing public deposits”. Following the company’s founding in 2015, Chin Woo Men has received a high amount of recognition in the Chinese MMA industry in a short period of time.
The Guangzhou Municipal Public Security Bureau Press Office announced on 27 August that according to the bureau’s investigation, Guangzhou Elephant Health Technology Co (owner of the “Healthy Cat” platform HealthMall.cn and Chin Woo Men) is suspected of illegally absorbing public deposits.
The company’s CEO Yang Huali (杨骅力) has been arrested, along with nine other executives from the company.
It has been reported by Chinese news site EcoSports that individuals – primarily sports people and sports lovers – gave the company hundreds of millions of yuan, with the total amount being in the tens of billions.
WeChat groups formed by people who claimed they were defrauded now number in the hundreds.
The company directly targeted those in and around the sports and sports education industry, as shown by EcoSports reprinting of the company’s financing announcements:
“Round A: This round of financing is jointly invested by four sports investment companies in Beijing, Shanghai, Guangzhou and Wuhan. Among its shareholders are 2 Olympic champions, 15 world champions, 23 national champions and 46 sports college professors. The current round of financing amounted to 35 million yuan, with a valuation of 350 million yuan.
“Round C: This round of financing mainly consists of more than 10 domestic sports industry companies in Beijing, Shanghai, Guangzhou, Fujian, Guangxi, Shandong, Anhui and other places, more than 30 Olympic champions and world champions. This round of C round of 500 million yuan, this round of financing will be used to enter the overseas capital market in the future.”
Chin Woo Men have not responded to enquiries via messenger platforms at the time of publication.
China law defines “illegally absorbing public deposits” and acts that involve companies “engaged in financial credit business not approved by The People’s Bank of China; illegally absorbing public deposits for the purpose to lend the funds for profit; or a legally established financial institution raising or lowering the interest rate of deposits in violation of commercial bank law and relevant laws and regulations in absorbing deposits”.
In a similar case in December 2017, the Zhengling Group was convicted of the crime of illegally absorbing public deposits. It was fined 2 million yuan, and the company directors were sentenced to approximately 8 years in prison each.
The bureau states that victims can report directly to the Tianhe District Bureau of the Guangzhou Municipal Public Security Bureau.
As the Chinese MMA market has been rapidly expanding over the past few years, regulations on the sport have become a priority in the government. This incidence of alleged mishandled financing will likely increase the scrutiny under which the sport further develops.