(Bloomberg) -- Ye Jianming, the founder and chairman of rapidly expanding Chinese conglomerate CEFC China Energy Co., has been investigated by government authorities, according to people with knowledge of the situation.
Ye, who grew CEFC from an obscure company focused mainly on the former Soviet Union into a conspicuous player on the world energy stage, is under investigation for “economic-related issues,” said one of the people, who asked not to be identified as the information isn't public. It's unclear if the investigation has concluded, and further details were unavailable.
The company is operating normally and media reports about Ye are “unfounded” and “irresponsible,” according to a statement on the CEFC's website late Thursday. Such reports were not verified by the company or by Ye himself, the statement says.
The investigation was initially reported Thursday by Chinese media outlet Caixin. Shares in related companies in Hong Kong, Singapore and Shenzhen tumbled and the trading of some bonds in Shanghai was suspended, signaling increased investor anxiety following the seizure last week of Anbang Insurance Group Co.
CEFC came to prominence last year after it agreed to purchase a 14 percent stake in the Russian oil behemoth Rosneft PJSC for $9 billion, the biggest overseas Chinese oil acquisition since 2012. In a statement at the time, CEFC described itself as the country's largest private oil and gas company, with 50,000 employees and revenue of more than $40 billion.
A Rosneft spokesman on Thursday declined to comment on the investigation.
Starting as a small trading company in 2002, CEFC bought assets including storage, terminals, refineries and oil fields, as well as financial units. Its rapid metamorphosis raised curiosity about the company's origins, how close it is to the government and how it funded the expansion.
“The biggest mystery through CEFC's rapid expansion in the past few years has been where exactly their money came from. Nobody was able to answer that question,”said Laban Yu, a Hong Kong-based analyst at Jefferies Group LLC. “I guess now the time has come to get this thing straightened out.”
The focus on Ye, who attributed about 70 percent of the success of the Rosneft agreement to President Xi Jinping's “Belt and Road” global investment initiative, comes amid scrutiny of the nation's rising tycoons and their acquisitive companies. While regulators last year sought to rein in many types of outbound deals, strategic industries like oil and mining were encouraged.
Authorities took temporary control of Anbang Insurance Group, best known for its purchase of the famed Waldorf Astoria hotel in New York, and will prosecute its founder for fraud. Meanwhile, other Chinese dealmakers say their activities continue unfettered. Guo Guangchang, chairman of Fosun International Ltd., told the Financial Times newspaper in an interview published Thursday that the conglomerate faces no political or financial barriers to its continued pursuit of overseas deals.
CEFC has also recently come under scrutiny in the U.S. Two men were arrested in November in New York on charges they paid $2 million in bribes to the president of Chad and $500,000 to a Ugandan official to secure oil drilling contracts for an unidentified Chinese company, the description of which matches CEFC. The company has countered that it didn't have any investments in Uganda and that its Chad project didn't involve a relationship with the government.
Caixin, known for its in-depth reporting and exposes, mentioned the probe only in the headline and one sentence of a 25,000-Chinese character story published Thursday. The Chinese version of the article had been removed from its website by the afternoon in Asia, while the shorter English version was still visible. A Beijing-based spokeswoman for Caixin wasn't immediately able to comment.
CEFC Anhui International Holding Co., a CEFC-related unit traded in Shenzhen, fell by the daily trading limit of 10 percent, while CEFC Hong Kong Financial Investment Co. lost 28 percent in Hong Kong and AnAn International Ltd., a Singapore-listed company related to Ye, tumbled as much as 47 percent before ending the day down 8 percent.
The 2020 exchange-traded bond sold by unit CEFC Shanghai International Group Ltd. slid as much as 31 yuan earlier Thursday to a record low of 60 yuan, according to the Shanghai exchange, which said it suspended five bonds related to CEFC.
--With assistance from Belinda Cao
To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net, Aibing Guo in Hong Kong at aguo10@bloomberg.net, Keith Zhai in Singapore at qzhai4@bloomberg.net, Alfred Cang in Singapore at acang@bloomberg.net.
To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Simon Lee
©2018 Bloomberg L.P.
With assistance from Steven Yang, Aibing Guo, Keith Zhai, Alfred Cang
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