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UPDATE: Trial of former Anbang head begins

Former Anbang Insurance Group Co. Ltd. Chairman Wu Xiaohui's trial began at a Shanghai court over alleged fraudulent fundraising and embezzlement.

The trial began March 28, according to the No. 1 Shanghai Intermediate People's Court official microblog account.

The court accused Wu of masterminding a fraud that involves 65.248 billion yuan, and of obtaining the control of Anbang Insurance Group and its subsidiaries through capital replenishment in June 2011, and March and December 2014.

As of Dec. 1, 2014, Wu controlled Anbang Insurance Group through 37 companies with a combined stake of 98.22%. The court said Anbang's last two capital replenishment in 2014 were funded by premium income excessively raised by Anbang Property and Casualty Insurance. Wu, through layered transfers, disguised the funds as 31 companies' own funds to replenish Anbang Insurance Group's capital, the court added.

It also accused Wu of using Anbang as a financing platform by instructing the company to develop insurance products resembling wealth management products and directing the falsification of financial statements and other documents to obtain regulatory approval for the products to generate premiums from customers.

The court said, as of Jan. 5, 2017, Anbang had sold investment-type insurance products to 10.56 million people, and the amount was 723.87 billion yuan more than the CIRC approved.

Wu objected to the allegations brought against him, saying that he was not aware that his actions constituted criminal activity.

Premiums from these high-risk products, which have now been largely prohibited by the insurance regulator, funded the acquisitions that drove Anbang to global prominence in recent years, including the Waldorf Astoria hotel in New York and stakes in Chinese banks.

In February, the China Insurance Regulatory Commission seized control of Anbang, saying that the company allegedly broke insurance laws and damaged its abilities to pay claims and debt. The regulator said it would initially take control of Anbang for one year, which would be extended if the company's operations did not return to "normal."