The firm was hit by exposure to China's embattled real estate space. Now, reports say that Chinese authorities are looking into the legal aspects of the matter.

Hywin Wealth, a wealth management firm hit by its ties to bankrupt China Evergrande Group, is being probed by authorities for alleged criminal acts after several suspects at the firm were taken away by Shanghai police, the South China Morning Post and other media outlets reported earlier this week. 

The public security bureau in southern Fengxian district reportedly said that it has taken “coercive measures” against at least three Hywin employees, according to a statement yesterday as reported by the SCMP. The investigations would be expanded to protect investors, it added.

“The police force is collecting criminal evidence on all fronts, making all-out efforts to deepen the investigations to recover losses and protect investors’ interests to the maximum,” the bureau was quoted saying. Two suspects, surnamed Han and Wang, have been detained for illegal fundraising, although the sum was not disclosed. 

This crackdown comes nine months after Hywin failed to repay investors when some of its wealth management products matured, the Post said. 

Hywin, once the largest distributor of real estate wealth management products, is controlled by Nasdaq-listed Hywin Holdings. 

At the end of June, Hywin Holdings said it was quitting the wealth management and asset management business and pivoting to the tech sector instead. 

Hywin has told WealthBriefingAsia – see here â€“ that some of its business entities, such as those in Hong Kong, are not affected.

At one point, Hywin was China’s largest provider of real estate wealth management products. Last December, it had pledged to set up a special group to address problems such as delayed payments on some of the projects it had offered. The matters showed how China’s property crisis, highlighted by defaults by developers such as Evergrande, has rippled across the financial sector.