(Yicai Global) June 2 -- Shares in Hesheng Special Material surged as much as 6.8 percent today after a Chinese court gave the advanced building materials maker’s majority shareholder a life sentence for running a ‘mafia-like’ online lending service that used violent means to collect funds.

Hesheng’s stock price [SHE:002290] was trading up 6.54 percent at CNY7.82 (USD1.23) at 1 p.m. China time, giving it a market capitalization of CNY1.9 billion (USD297.7 million). Earlier in the day its share price had reached CNY7.84.

Zhang Wei, who holds a 32 percent stake in Hesheng through his company Shenzhen Zhongkechuang Asset Management, has never been part of senior management at Hesheng and has had no role in decision making, the Suzhou-based firm said yesterday. Business is stable and his sentence will have little impact on the company, it added.

Hesheng will repay outstanding loans of CNY590 million (USD92.4 million) that had been guaranteed by Zhang and his wife, the firm said last month. Hesheng reported profit of CNY55.1 million (USD8.6 million) last year, a big turnaround from its losses of CNY1.2 billion in 2019.

Zhongkezhuang’s offices were shut down in 2019 after a police raid in which several members of senior management, including Zhang, were detained. Zhang was accused of running a peer-to-peer lending platform that advertised fake projects in order to get people to borrow money at usurious rates to invest in them and then used ‘gangster-style’ methods to get them to pay up, the Shenzhen police said in April 2019.

He has been sentenced to life imprisonment for a number of crimes including running a ‘mafia-style’ fundraising operation, kidnapping clients, illegal possession of firearms and faking lawsuits, the Shenzhen Intermediate People’s Court said.

Zhang's online loan platform 88 Fortune was shut down in February 2017 and had debts of CNY753 million (USD118 million) as of December 2018. His stake in Hesheng has been frozen by the courts.

Editor: Kim Taylor