The highly anticipated Neo Group case concluded in its final judgment today.
On November 3, the Guangdong High People’s Court issued a final verdict on the fundraising fraud and illegal absorption of public deposits case involving Neo Capital Management Group Co., Ltd. (Neo Group), led by its principal, Peng Tie, rejecting the appeal and upholding the original sentence.
The Second Trial Maintains the Original Verdict in the Neo Group Case
On July 14, 2023, the Shenzhen Intermediate People’s Court sentenced Peng Tie to life imprisonment for fundraising fraud and illegal absorption of public deposits, deprived him of political rights for life, and confiscated all his personal assets. Peng Gang was sentenced to eleven years in prison and fined one million RMB. The remaining 24 defendants received prison sentences ranging from nine years to two years and fines. After the first trial, Peng Tie and 11 other defendants filed appeals.
The court found that from 2013 to 2021, Peng Tie, after founding the Neo Group, along with Peng Gang and others, illegally absorbed nearly 102.6 billion RMB from over 1.31 million people through their subsidiary companies, such as “Neo Online,” “Neo Money Pot” P2P platform, and subsidiaries like “Neo Investment,” “Neo New Wealth,” and “Neo Fund,” using private equity financial products. Of this amount, 12.6 billion RMB in principal remained unpaid. During this time, Peng Tie, Peng Gang, and six others continued illegal fundraising activities despite knowing the group had a massive funding gap and an extremely high bad debt rate, using most of the raised funds for their own benefit, resulting in a fraudulent fundraising of 8.934 billion RMB.
In the second trial, the court found that the first trial’s verdict was based on clear facts, reliable and sufficient evidence, accurate convictions, appropriate sentencing, a lawful trial process, and made the above decision.
It is worth noting that after Peng Tie and others were arrested, the public security authorities worked tirelessly to recover assets related to the case, including funds, stocks, equity, and real estate. Currently, the assets that have been recovered will be returned to the participants in the fundraising after the judgment becomes effective, and Peng Tie and others will be ordered to continue making repayments for any shortfall.
Public information shows that Neo Group’s subsidiary, Neo Online, was once one of the largest P2P platforms in Guangdong. Neo Group mainly conducted online illegal fundraising through platforms like Neo Online and Money Pot, and unlawfully raised funds by selling private equity fund products under the names of companies like Neo New Wealth and Neo Fund.
The crisis originated from Neo Online. As early as September 2017, Neo Online faced liquidity difficulties, and investors’ funds were not paid on time. In 2018, Neo Online began experiencing massive overdue payments, affecting other subsidiaries, and in March 2019, Neo New Wealth also began experiencing widespread overdue payments, leading to a complete crisis for Neo Group.
The main reasons for Neo Group’s crisis were its false underlying assets and suspected fund mismatch and capital pool. Securities Times reporters previously analyzed Neo’s operating model and found that whether it was the “Newbie Exclusive” products, “Stable Investment,” or “Rising Wealth Bull” products displayed on its official website, all had one common issue: after purchasing products with a term of more than six months, they could be transferred after just one month, with “Rising Wealth Bull” even allowing transfers after just seven days.
Generally, such a high-frequency transfer of debt rights is meant to improve platform liquidity. As demand deposits are strictly prohibited, the longer the term of the asset target, the greater the dependence on debt transfers, as investors may need money urgently. Thus, the platform allows debt transfers while promoting long-term and high-yield products, relying on a quasi-demand deposit operating model, achieving high-frequency debt transfers, and Neo Online further increased the debt transfer rate through its automatic bidding tool, thereby increasing the liquidity of the entire platform.
In fact, the conventional debt transfer model (where third-party creditors of the platform transfer their credit asset income rights to investors) is prohibited by regulatory authorities. Although personal debt transfer models are not explicitly prohibited, they still carry significant risks, as debt transfers may involve capital pool and term mismatch issues, as well as splitting standards, where debt relationships are not one-to-one.
On May 6, 2021, the Nanshan Branch of the Shenzhen Public Security Bureau issued a situation report regarding the case of Neo Capital Group Co., Ltd. (Neo Capital) on its WeChat official account “Shenzhen Nanshan Public Security.” According to the announcement, the police had frozen 663 accounts related to the case, recovered more than 140 million RMB in funds, sealed 1056 sets of properties related to the case, and froze 99.91 million shares of company equity. Among the 1056 properties that were sealed, there were 3 residential properties and 4 commercial properties in Shenzhen, 108 residential properties and 858 commercial properties in Guangzhou, 76 commercial properties in Foshan, 6 commercial properties in Shanghai, 1 residential property in Harbin, and 2 pieces of land within Harbin, Heilongjiang Province, and Hanshou County, Hunan Province, totaling 24,037.5 square meters.
The Peng Brothers Behind the Scenes
Without venture capital and financing, achieving a billion-dollar scale from grassroots origins is indeed rare in the industry. Behind all this was a key figure, Peng Tie.
According to a previous report in the “Shaoyang Daily” titled “From a Cowherd to Chairman of Neo Capital,” Peng Tie was born in 1976 in Daxiang District, Shaoyang. As the youngest in the family, he was given the nickname “Niuniu” (Little Bull) because of his robustness since childhood.
Peng Tie is most known for his previous professional experience as the CEO of Jiachaoye Financial Investment Co., Ltd., which was a subsidiary of the Hong Kong-listed Jiachaoye Group. Before founding Neo Online, Peng Tie was involved in the establishment of the P2P lending platform Renren Jucfai, where he was responsible for risk control operations. He then left and established Neo Group in 2012.
According to Tianyancha data, Peng Tie has created a vast financial empire around Neo Group, controlling as many as 88 companies, some of which are unnamed and identified as first, second, and third generations. Notably, his main feature in equity investment is not mere participation but control, with investment ratios mostly exceeding 80%. He personally holds 89.6% of Neo Capital’s equity, and his subsidiary companies under Neo, such as Neo Online, Neo Jin Fu, Neo Puhui, Neo New Wealth, and Neo Investment, are all 100% owned.
“Peng Tie is a highly capable, ambitious, and visionary person, with a strong desire for control over the company. At the time, Neo Online was growing rapidly, and there were VC firms interested in investing, but due to disagreements over the price and his unwillingness to dilute equity, they missed the opportunity. Even in later stages, venture capital firms hesitated to invest. In fact, everyone privately liked to call him ‘Tie Ge’ (Brother Tie), and he had a touch of the old-school brotherhood spirit,” commented a former insider of the Neo series.
The entire Neo Capital series still has a strong family touch. According to Tianyancha data, Peng Gang and Peng Zuihong are the most important figures in the equity structure of the Neo series. Peng Zuihong holds key positions in 77 companies, while Peng Tie’s brother, Peng Gang, is listed in 167 companies. Although they hold multiple roles, Peng Zuihong previously served as an Institutional Investment Manager at Neo Online, while Peng Gang remains more enigmatic, with some insiders joking that they have never seen him in person.
Despite Peng Tie’s low-profile nature, the companies he controls are far from inconspicuous, especially Neo Online, which has been bold in its brand promotion. In January 2016, it signed a contract with Dapeng, a well-known actor, for an endorsement fee of 8 million RMB. Neo Online has also partnered with Shenzhen Red Diamonds Football Club, NBA team Dallas Mavericks, and the International Champions Cup China, among others. It is understood that the advertising and promotional expenses for Neo Online are at least 20 million RMB.