Xu, a self-taught stock speculator, was known for his swift and accurate short-term investment decisions that often led to high returns.
The flagship fund at Zexi Investment, the firm Xu managed, reported returns of 638 per cent in the three years to the end of 2014, the best of any private equity fund on the mainland.
Xu turned down all requests for media interviews, and Zexi’s clients were never publicized.
But investigators’ suspicions were raised when Zexi’s run of good luck continued in the summer of last year.
As US$5 trillion was wiped off the value of the mainland’s share markets in just a few weeks, Zexi’s funds continued to report hefty returns.
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Amid the fallout, the authorities mobilized police to raid brokerage houses and make a number of high-profile arrests, including senior executives at Citic Securities, a well-connected brokerage house.
High-ranking officials at the China Securities Regulatory Commission, the stock market regulator, were also swept up in the raids but there is no confirmation whether Xu colluded with any of them.
Standing on trial alongside Xu are executives of 13 listed firms. They are accused of conspiring to make illegal profits in a case involving about 40 billion yuan (HK$45 billion), according to mainland financial magazine Caixin.
Yi said Xu’s case exposed the many loopholes in the mainland’s “legal and regulatory systems” and showed that rules on paper were often bent or ignored in the interests of the rich and powerful.
“In general, China’s reforms always slow down if such reforms hurt vested interest groups – the same in the stock market and the housing market,” he added.