He Xin, the son-in-law of Phoenix Media Investment Holdings Limited's founder Liu Changle, has been detained by Chinese police in Hainan province for his role in a collapsed peer-to-peer lending platform.

He, the controlling shareholder of Phoenix Zhixin Information Technology (Haikou) was detained, as he was suspected of illegally accepting deposits from the public, according to a May 5 announcement by the Hainan provincial capital's police, which identified him only by his surname. He, who owns 70.8 per cent of Phoenix Financial, is Liu's son-in-law, according to an April 29, 2020 filing to Hong Kong's stock exchange, where Phoenix Media's shares are listed.

The detention of the executive - part of a broader crackdown by Chinese regulators on the peer-to-peer lending industry - is a bookend in the disposal of Liu's controlling interests in one of the world's largest Chinese-language broadcasters, via two deals less than a month ago worth HK$1.156 billion (US$149.2 million). The government had whittled more than 6,000 peer-to-peer lenders in China to fewer than three dozens in a push to instil financial discipline and ring-fence risks amid slower economic growth and a coronavirus pandemic.

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He Xin, the son-in-law of Hong Kong-based Chinese broadcaster Phoenix Media Investment founder Liu Changle. Photo: Xinhua alt=He Xin, the son-in-law of Hong Kong-based Chinese broadcaster Phoenix Media Investment founder Liu Changle. Photo: Xinhua

Phoenix Zhixin is the operating arm of Phoenix Financial, which was allegedly involved in a peer-to-peer lending scandal that saddled more than 70,000 depositors and investors with billions of yuan in losses. Phoenix Financial, which provides online loans, funds, overseas investment and wealth management, is a strategic investment by Phoenix Media, according to the 2020 annual report.

In an abrupt move in September 2020, Phoenix Financial removed online loans from its platform, causing payments on outstanding borrowings to stagnate while projects became overdue ever since, according to reports by Chinese media. In November, local authorities in Haikou summoned Phoenix Financial and instructed the company to get out of the business of providing online loans.

Liu Changle, chairman and CEO of Phoenix Satellite Television Holdings Limited at the Hong Kong Convention and Exhibition Centre in Wan Chai on November 22, 2012. alt=Liu Changle, chairman and CEO of Phoenix Satellite Television Holdings Limited at the Hong Kong Convention and Exhibition Centre in Wan Chai on November 22, 2012.

A management reshuffle kicked off in February, with Liu handing over his chief executive post to the Shanghai municipal government's former spokesman Xu Wei.

Two months later, Liu sold 21 per cent of Phoenix to Bauhinia Culture Holdings, while another 16.9 per cent went to a unit controlled by casino heiress Pansy Ho Chiu-king's Shun Tak Holdings. Bauhinia, a unit controlled by the Chinese government's Central Liaison Office, is chaired by the former Hainan provincial executive vice-governor Mao Chaofeng. Ho is the daughter of the late casino magnet Stanley Ho Hung-sun.

Phoenix posted a net loss of HK$1.04 billion last year, including a HK$585.7 million write-down on its internet media investments. Its operating loss narrowed to HK$502 million last year from a loss of HK$728 million in 2019, due to cost cutting. Shares of the company fell 3.5 per cent to 82 Hong Kong cents in recent trading.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

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