SOE denies involvement in 100 million yuan fraud

A State-owned enterprise in Wenzhou, Zhejiang Province, claimed on Thursday that it wasn't involved in a massive hundred-million-yuan ($16 million) fraud, as police continue to hunt for the main suspects.

The Wenzhou Urban Investment Group said the suspect, Jiang Gongkai, has since July defrauded more than 100 victims who thought they were investing in government projects. The group said all embezzled funds went into Jiang's account, China News Service reported Thursday.

Jiang, who was employed by the land expropriation department of Wenzhou's Binjiang New Area, had been in charge of demolition work in the city's Guanghua Bridge area. Last July, Jiang started a fake investment fund under the name of the new area and raised over a hundred million yuan from more than 100 investors. Jiang disappeared in late December and is still at large.

Jiang's department is directly connected to the Wenzhou Urban Investment Group, leading victims to question whether the later was involved in the fraud.

Some victims claimed that the seal used on investment documents was from Jiang's department. The Wenzhou Urban Investment told Wenzhou City News Wednesday that it was still not clear if Jiang used the department's official seal or forged one of his own.

The local police began investigating Jiang after receiving reports from victims in late December. They were about to arrest him when he disappeared, according to previous reports.

Wenzhou Urban Investment Group required all its departments to check their finance records to help the police investigation, according to Wenzhou City News. The victims have formed a group to try to locate Jiang and recover their money.

Illegal financing is especially prevalant in Wenzhou, Zhejiang Province, as local small and medium-sized enterprises are desperate for capital. In late March last year, Wenzhou won Beijing's approval for a pilot project that will allow residents of the city to set up loan companies.