Noah Holdings, one of China's largest wealth managers, levied accusations of fraud against Camsing International Holding, the Hong Kong-listed company, in relation to a $490m asset management product at risk of defaulting.
According to Bloomberg, Noah CEO and co-founder Wang Jingbosaid in an internal memo that the company has filed a lawsuit and reported Camsing to regulators with regards to an asset management product valued at 3.4bn yuan ($490m).
Maturity of the product would be "extended by as much as one year to ensure payment", the note also said.
Late last Friday, Camsing said in a statement that its chairwoman Lo Chingwas being held in "criminal custody" by Chinese authorities in Shanghai and that "the directors of the company were unaware of the reasons". Camsing stock subsequently plunged 90% Monday morning.
Camsing is a Hong Kong-listed conglomerate with diversified businesses spanning across entertainment and healthcare.
Calls by Noah for a fraud investigation sparked quarrels between financial institutions and e-commerce giants JD.com and Suning.com over their roles in the fundraising "scandal" involving Camsing.
It was alleged that underlying assets related to the products were backed by accounts payable to Camsing Global from Beijing JD Century Trade Holdings Ltd, a unit of JD.com. But the e-commerce giant denied any involvement in the fundraising. It says it has been cooperating with police on the matter.
Chinese investors have seen a slew of recent frauds involving listed companies, including false financial reporting by drugmaker Kangmei Pharmaceutical and fake profits at laminating-film maker Kangde Xin Composite Material Group. The incidents are adding to an already stressed credit market: Bonds from at least 56 Chinese companies totalling US$40 billion face repayment pressure, according to company and ratings firm statements compiled by Bloomberg.