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China Guangfa Bank says guarantee documents on defaulted bonds were fake

China Guangfa Bank Co. Ltd. said the guarantee documents, officials seals and personal seals presented by an insurer of a defaulted corporate bond were fake, Reuters reported Dec. 26.

Zheshang P&C Insurance Co. Ltd had presented documents guaranteeing US$45 million of bonds issued by Chinese phone maker Cosun Group. Zheshang P&C was the insurance underwriter for the bonds.

The insurer on Dec. 25 published two documents on its website that showed China Guangfa Bank had guaranteed the insurer's policies for the Cosun bonds. The documents were issued at the bank's Huizhou branch in December 2014, when the bonds were sold, the insurance company said.

China Guangfa Bank, however, said the documents and the seals were counterfeit and that it has reported the incident to the police as a possible incident of financial fraud.

Ant Financial Services Group, which operates the online platform where the bonds were sold, has asked Zheshang P&C to repay investors. It noted that the insurer does not have any reason to refuse repayment.

China Guangfa Bank did not respond to Reuters' request for comment, while Zheshang P&C and bond issuer Guangdong Equity Exchange declined to comment. Cosun could not be reached for comment.

The issue comes on the heels of another scandal involving forged bond agreements that led to brokerage Sealand Securities sharing potential losses of up to US$2.4 billion, Reuters said.