The China Securities Regulatory Commission (CSRC) has declared war on what it calls stock market crocodiles following the collapse of a highly leveraged, CNY3 billion take-over bid for Shanghai-listed animation company Zhejiang People Culture (ZPC). The bidding vehicle, Longwei Culture and Media, was set up in Tibet in November 2016 by actress Zhao Wei and her husband Huang Youlong with a registered capital of just CNY2 million. A month later, it offered CNY3.06 billion for a controlling 29% stake in ZPC, a former property developer that now produces cartoons. The Shanghai Stock Exchange asked the two companies to explain where the funding was coming from. Longwei said Zhao and Huang were proposing to pay CNY60 million from their own pockets, with CNY1.5 billion borrowed, with no collateral, from Yinbixin, a trust investment firm based in Tibet, and another CNY1.5 billion borrowed from an unidentified bank, using ZPC shares as collateral. Chinese law is silent on leveraged take-overs – even ones with a sky-high leverage ratio of 50, as in the proposed ZPC deal – and there are no rules preventing trust companies from funding them. That has made such opaquely financed deals quite common, leading to big price swings, increased market volatility, massive profits for a few and big losses for retail investors. The Chinese government is now determined to bring the tycoons pulling the strings behind such deals to account and root out potential sources of financial instability, the South China Morning Post reports. ZPC announced on February 14 that Longwei had scaled back the bid to CNY529 million for a 5% stake because it was unsure it could secure the funds needed to complete the original deal. Upon further inquiry from the stock exchange, Longwei and ZPC said Yinbixin was still willing to lend, but the unidentified bank’s risk control department had vetoed its CNY1.5 billion loan.