EMAILED ON February 26, 2018 BY Zachary Crockett

One of Asia’s biggest companies just got steamrolled by the Chinese government

Last week, China’s insurance regulator announced it will “take control” of Anbang Insurance Group and prosecute its chairman, Wu Xiaohui, for fraud and “economic crimes.”

Over the course of 14 years, Wu leveraged his political connections to grow Anbang into a massive conglomerate with $300B in assets, many of which were overseas. But, in his drive for global expansion, he racked up serious debt — and attracted the attention of government officials.

From insurance company to global powerhouse

Anbang began its life in 2004 as a tiny car-insurance company. For many years, it just sold insurance policies. But its founder, Wu, developed greater ambitions.

The company began peddling “wealth management products” (or short-term investments with fixed-rate returns), a largely unregulated way for Chinese companies to raise capital, which, according to the NYT, led Anbang’s assets to multiply 2,876-fold in a 6-year period.

With that massive momentum, Anbang snatched up properties across the globe — including dropping $2B on New York’s Waldorf Astoria hotel, and $6.5B on a multi-city hotel deal with Blackstone.

Where’d things go wrong?

The Chinese government had 2 major problems with the way Anbang was going about its business.

First, they took issue with the company’s wealth management products, which they saw as “high-yielding, short-term investment products in the guise of insurance” that posed a huge risk to mom and pop investors.

Second, they didn’t like Anbang’s massive expenditures overseas. Last year, China’s president, Xi Jinping, called companies like Anbang “financial crocodiles,” blaming them for hemorrhaging money outside of China’s borders and destabilizing the country’s economy.

What’s next?

China’s insurance regulator claims it will assume control of Anbang for the next year, during which it plans to stabilize business operations and bring new investors on board.

The future is a little less certain for the company’s leader, Wu — but economic crimes aren’t treated lightly in China.