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| A Bruised Investor Seeks Justice for China’s Market Turmoil | A Bruised Investor Seeks Justice for China’s Market Turmoil |
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| SHANGHAI — With the nausea came a sense of frustration. Earlier this year, Xu Caiyuan watched helplessly as the numbers flashed across a computer screen in his office in Shanghai’s glittering financial district. | SHANGHAI — With the nausea came a sense of frustration. Earlier this year, Xu Caiyuan watched helplessly as the numbers flashed across a computer screen in his office in Shanghai’s glittering financial district. |
| The Chinese stock market was in free fall again. In a spectacular crash just months earlier, it had wiped out significant assets of professional investors like himself and the life savings of many ordinary citizens. The instability spread to global markets. | The Chinese stock market was in free fall again. In a spectacular crash just months earlier, it had wiped out significant assets of professional investors like himself and the life savings of many ordinary citizens. The instability spread to global markets. |
| “During the stock market plunge, many middle-class investors lost their money, and they don’t know why,” Mr. Xu, 38, said over lunch in a Southeast Asian restaurant overlooking a park in Shanghai’s French Concession. “The reason the market plummeted is because this is a man-made disaster.” | “During the stock market plunge, many middle-class investors lost their money, and they don’t know why,” Mr. Xu, 38, said over lunch in a Southeast Asian restaurant overlooking a park in Shanghai’s French Concession. “The reason the market plummeted is because this is a man-made disaster.” |
| “I think there’s a human factor behind the stock market crash,” he added. “The crash took me by surprise. I thought, ‘This isn’t normal.’” | “I think there’s a human factor behind the stock market crash,” he added. “The crash took me by surprise. I thought, ‘This isn’t normal.’” |
| Long a shareholder advocate, Mr. Xu is now waging a battle against a powerful government agency in hopes of punishing the officials he blames for the twin disasters, which shook world indexes in summer 2015 and this January. | Long a shareholder advocate, Mr. Xu is now waging a battle against a powerful government agency in hopes of punishing the officials he blames for the twin disasters, which shook world indexes in summer 2015 and this January. |
| Mr. Xu’s target is the China Securities Regulatory Commission, which came under intense criticism from investors and some officials for withholding or misrepresenting information and enacting emergency trading controls that contributed to the terrible losses suffered by investors. Its chairman, Xiao Gang, was fired from his post in February. | Mr. Xu’s target is the China Securities Regulatory Commission, which came under intense criticism from investors and some officials for withholding or misrepresenting information and enacting emergency trading controls that contributed to the terrible losses suffered by investors. Its chairman, Xiao Gang, was fired from his post in February. |
| The market instability led global analysts and many investors here to ask whether the Communist Party was properly managing the markets as well as the broader economy. | The market instability led global analysts and many investors here to ask whether the Communist Party was properly managing the markets as well as the broader economy. |
| In the wake of the market crashes, Mr. Xu has emerged as the face of investor frustration as he tries to sue the agency, known widely as the C.S.R.C. Chinese news organizations have published a stream of articles about Mr. Xu this year. Several Chinese news sites have called Mr. Xu the “big brother helping to protect rights.” CNBC, the American financial television news network, did a segment on him. | In the wake of the market crashes, Mr. Xu has emerged as the face of investor frustration as he tries to sue the agency, known widely as the C.S.R.C. Chinese news organizations have published a stream of articles about Mr. Xu this year. Several Chinese news sites have called Mr. Xu the “big brother helping to protect rights.” CNBC, the American financial television news network, did a segment on him. |
| In person, Mr. Xu does not look like a legal brawler. A slim, short man, he showed up to lunch wearing hip glasses and a navy suit with white dots. But as he pulled out documents related to his lawsuit and spoke about them in sharp bursts, his combative side became evident. | In person, Mr. Xu does not look like a legal brawler. A slim, short man, he showed up to lunch wearing hip glasses and a navy suit with white dots. But as he pulled out documents related to his lawsuit and spoke about them in sharp bursts, his combative side became evident. |
| “I don’t know if there will be justice, but I can choose to do things,” he said. “The reason we appealed to the courts is we trust in the courts and the legal system.” | “I don’t know if there will be justice, but I can choose to do things,” he said. “The reason we appealed to the courts is we trust in the courts and the legal system.” |
| Mr. Xu had already achieved some prominence in financial circles as an activist investor, known for bringing lawsuits against companies he had invested in that he thought had failed to act in the best interests of shareholders. | Mr. Xu had already achieved some prominence in financial circles as an activist investor, known for bringing lawsuits against companies he had invested in that he thought had failed to act in the best interests of shareholders. |
| His attempt to sue the C.S.R.C. after the January 2016 crash was different, because he was taking on the government. A lower court and a high court rejected the lawsuit this year, despite the news media coverage. In October, he filed an appeal with the Supreme People’s Court, hoping the judges would force a lower court to hear the case. | His attempt to sue the C.S.R.C. after the January 2016 crash was different, because he was taking on the government. A lower court and a high court rejected the lawsuit this year, despite the news media coverage. In October, he filed an appeal with the Supreme People’s Court, hoping the judges would force a lower court to hear the case. |
| He has been traveling between Shanghai and Beijing all year to deal with the courts, and now awaits an answer. | He has been traveling between Shanghai and Beijing all year to deal with the courts, and now awaits an answer. |
| Zhang Ren, a lawyer at the Beijing Century Law Firm who has been advising Mr. Xu, said the government’s attempts to ignore Mr. Xu’s lawsuit “are embarrassing.” | Zhang Ren, a lawyer at the Beijing Century Law Firm who has been advising Mr. Xu, said the government’s attempts to ignore Mr. Xu’s lawsuit “are embarrassing.” |
| “And the Intermediate Court’s negligence is embarrassing, too,” he added, referring to a lower court in Beijing that rejected Mr. Xu’s lawsuit. | “And the Intermediate Court’s negligence is embarrassing, too,” he added, referring to a lower court in Beijing that rejected Mr. Xu’s lawsuit. |
| Mr. Zhang said the case was one that could be a legal marker. “When China becomes more democratic and respects the rule of law, this could be a precedent,” he said. | Mr. Zhang said the case was one that could be a legal marker. “When China becomes more democratic and respects the rule of law, this could be a precedent,” he said. |
| Another lawyer, Liang Min, disagreed, saying Mr. Xu was pushing a “sensationalistic” case with no basis in proper administrative law. | Another lawyer, Liang Min, disagreed, saying Mr. Xu was pushing a “sensationalistic” case with no basis in proper administrative law. |
| Mr. Xu comes from Wenzhou, in Zhejiang Province in southeastern China, known as a hotbed of entrepreneurship. The youngest of three children, Mr. Xu attended Huadong Normal University in Shanghai, where he studied management. He said he began investing in stocks in 1998, even before he had graduated. | Mr. Xu comes from Wenzhou, in Zhejiang Province in southeastern China, known as a hotbed of entrepreneurship. The youngest of three children, Mr. Xu attended Huadong Normal University in Shanghai, where he studied management. He said he began investing in stocks in 1998, even before he had graduated. |
| “At the time, I would look through the financial reports and annual reports of listed companies and make decisions,” he said. | “At the time, I would look through the financial reports and annual reports of listed companies and make decisions,” he said. |
| After graduation, he worked several years as a university administrator, then became a full-time investor and eventually started a company to manage investment funds. He now has a small office in the Lujiazui neighborhood, the center of Shanghai’s financial industry. | After graduation, he worked several years as a university administrator, then became a full-time investor and eventually started a company to manage investment funds. He now has a small office in the Lujiazui neighborhood, the center of Shanghai’s financial industry. |
| He manages two private equity funds, both named after him: Caiyuan No. 1 and Caiyuan No. 2. He belongs to a Wenzhou business association in Shanghai — it is common for Wenzhou entrepreneurs to band together in cities where they live — and to an investors’ group in Lujiazui. | He manages two private equity funds, both named after him: Caiyuan No. 1 and Caiyuan No. 2. He belongs to a Wenzhou business association in Shanghai — it is common for Wenzhou entrepreneurs to band together in cities where they live — and to an investors’ group in Lujiazui. |
| Mr. Xu said that the funds weathered the market crashes and that his lawsuit was tied solely to his personal investments. He declined to say how much money he lost in the market turmoil, but said some friends had lost the equivalent of tens of millions of dollars. | Mr. Xu said that the funds weathered the market crashes and that his lawsuit was tied solely to his personal investments. He declined to say how much money he lost in the market turmoil, but said some friends had lost the equivalent of tens of millions of dollars. |
| Mr. Xu became a public figure in 2008, when he led a shareholder suit against Gangfan, a state-owned steel company based in Sichuan Province that was undergoing restructuring, accusing it of wrongly failing to buy back stock warrants held by investors. A local court ruled in favor of the shareholders. The central government agency in charge of state-owned enterprises then ordered Gangfan to pay the investors 7 billion renminbi, or more than $100 million. | Mr. Xu became a public figure in 2008, when he led a shareholder suit against Gangfan, a state-owned steel company based in Sichuan Province that was undergoing restructuring, accusing it of wrongly failing to buy back stock warrants held by investors. A local court ruled in favor of the shareholders. The central government agency in charge of state-owned enterprises then ordered Gangfan to pay the investors 7 billion renminbi, or more than $100 million. |
| The victory made news. Since then, Mr. Xu has brought a half-dozen similar lawsuits. In 2010, he was named a “Wenzhou Economic Figure” by Wenzhou Economic Newspaper for his efforts to protect shareholders’ rights. | The victory made news. Since then, Mr. Xu has brought a half-dozen similar lawsuits. In 2010, he was named a “Wenzhou Economic Figure” by Wenzhou Economic Newspaper for his efforts to protect shareholders’ rights. |
| “Some of the listed companies, when they see me, they avoid me like the plague,” he said. “A regulatory body, for example the C.S.R.C., it has headaches.” | “Some of the listed companies, when they see me, they avoid me like the plague,” he said. “A regulatory body, for example the C.S.R.C., it has headaches.” |
| Not all of the lawsuits have been successful. He failed in an attempt to sue a pharmaceuticals company in Inner Mongolia with large property holdings — “This company was set to be a big enterprise in Inner Mongolia, so I think it had influence,” he said. | Not all of the lawsuits have been successful. He failed in an attempt to sue a pharmaceuticals company in Inner Mongolia with large property holdings — “This company was set to be a big enterprise in Inner Mongolia, so I think it had influence,” he said. |
| Police officers in Inner Mongolia called Mr. Xu to question him over the telephone. Officers in Shanghai did the same. | Police officers in Inner Mongolia called Mr. Xu to question him over the telephone. Officers in Shanghai did the same. |
| Through the years, Mr. Xu has continued investing. “I don’t think I’m an opportunist,” he said. “I think I’ve always invested based on the value of the companies.” | Through the years, Mr. Xu has continued investing. “I don’t think I’m an opportunist,” he said. “I think I’ve always invested based on the value of the companies.” |
| The case Mr. Xu is trying to make against the China Securities Regulatory Commission is not an easy one. Mr. Xu said he believed the market crashed in part because state-owned enterprises sold large holdings and withdrew from the market under cover from the agency, which reassured people that big investors were staying in the market. | The case Mr. Xu is trying to make against the China Securities Regulatory Commission is not an easy one. Mr. Xu said he believed the market crashed in part because state-owned enterprises sold large holdings and withdrew from the market under cover from the agency, which reassured people that big investors were staying in the market. |
| He also said the C.S.R.C. had issued a statement called Document No. 21, in which its head, Mr. Xiao, said that a large state securities company would keep up its investments to stabilize the market. That turned out not to be true, Mr. Xu said — in reality, the company and other state-owned enterprises sold off stocks. | He also said the C.S.R.C. had issued a statement called Document No. 21, in which its head, Mr. Xiao, said that a large state securities company would keep up its investments to stabilize the market. That turned out not to be true, Mr. Xu said — in reality, the company and other state-owned enterprises sold off stocks. |
| The C.S.R.C. spokesman did not respond to multiple calls made to his office on Friday seeking comment. | |
| Mr. Xu also tried to file a second lawsuit against the agency, this one accusing the agency of not disclosing information properly. The First Intermediate Court accepted the case in September, but then last month reversed itself. Mr. Xu said he was also appealing that decision. | Mr. Xu also tried to file a second lawsuit against the agency, this one accusing the agency of not disclosing information properly. The First Intermediate Court accepted the case in September, but then last month reversed itself. Mr. Xu said he was also appealing that decision. |
| “I think Wenzhou people are very persistent,” Mr. Xu said. “They can endure hardship. They don’t surrender to failure.” | “I think Wenzhou people are very persistent,” Mr. Xu said. “They can endure hardship. They don’t surrender to failure.” |