Bank of China Investors Seek to Sue Bank over $85 Million in Crude Oil Losses

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Hundreds of clients of big state-owned lender Bank of China (BOC) plan to sue the bank over $85 million in losses incurred via the purchase of crude oil investment products.

Representatives of up to 1000 investors burned by BOC’s Crude Oil Treasure (原油宝) product announced on 25 April that they had been in contact with law firms and planned to file a class action against the bank requiring the following:

  1. Recovery of all principal due to invalidity of contract,
  2. Suspension of transactions from 22:00 4 April, and compensation in accordance with this price,
  3. Where the guarantee sum is less than 20%, the bank should forcibly close positions and provide compensation on this basis.

Hun­dreds of BOC’s re­tail in­vestors lost around 600 mil­lion yuan (ap­prox. $85 mil­lion) af­ter plac­ing bets on West Texas In­ter­me­di­ate via the Crude Oil Treasure instrument.

The “Crude Oil Trea­sure” prod­uct en­abled Chi­na’s do­mes­tic in­vestors to tap WTI oil fu­tures with­out the need to launch an off­shore ac­count. The prod­uct did not per­mit lever­age and re­quired 100% mar­gin. 

A plunge in oil prices to be­low zero at the start of the week has left these in­vestors ow­ing 400 mil­lion yuan to BOC, on top of around 200 mil­lion yuan in ini­tial losses. 

On the evening of 24 April BOC announced that it was “deeply troubled” customer loses, and would bear corresponding liability under a legal framework.

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