SINGAPORE (Apr 17): Midas Holdings announced Tuesday that former executive chairman Chen Wei Ping is under investigation in China for his suspected involvement in fraud relating to loans.

Midas says police from the Changchun City Economic Crime Investigation Unit in China’s Jilin Province had visited the provincial branches of two banks – China Development Bank and The Export-Import Bank of China.

The banks had notified Midas’ subsidiary, Jilin Midas Light Alloy Co. (JMLA), regarding the investigations on Mar 30.

However, the group says Chen, who was then still executive chairman of the company, had failed to declare to the board that he was assisting in the police investigation.

See: CAD launches investigations into Midas

The two banks had on Mar 30 also jointly requested JMLA to explain the lawsuits; the bankruptcy restructuring progress of the project guarantor, Jilin Midas Aluminium Industries Co.; the involvement of fraud relating to loans by Chen; the financial and operational conditions of the group; and the repayment plans for past due loans.

JMLA had been given five days to respond to the written request.

It is unclear if Chen and JMLA had responded to the banks.

See: Jilin Midas Aluminium Industries put under judicial management

On Apr 2, the Singapore Exchange Regulation (SGX RegCo) issued Midas with a notice of compliance, stripping Chen and Ma Ming Zhang, legal representative of Luoyang Midas, from their appointments with immediate effect.

See: SGX strips Midas chairman Chen and legal representative Ma of their appointments

On Monday, Midas announced in a filing its board had discovered some RMB 23 million ($4.8 million) was transferred to an unrelated company Chongqing Huicheng Aluminium which was controlled by LakeForest Capital, whose sole shareholder is Chen Chen, the nephew of Chen.

See: Jilin Midas Aluminium Industries put under judicial management

The disbursement was purported for loan repayment but the board said no such loan was recorded in the group’s accounts.

Shares of Midas have been suspended since Feb 8. It last traded at 19.2 cents.