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24 views • June 9, 2020
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Investors Commit Suicide After Bank of China’s “Futures Contract of Crude Oil” Loses an Estimated $30 Billion Yuan

The Epoch Times
The Epoch Times
As international crude oil prices continue to fall, the “Futures Contract of Crude Oil,” a wealth financial management product of the Bank of China, left investors with a negative price value. In addition to that, they have to pay back a huge amount of money owed to the bank. A large number of investors have gone to the Bank of China and China Banking Regulatory Commission to protest. On April 21, the delivery price for West Texas Intermediate Crude Oil dropped $55.90, which represents a decline of 306 percent, for the month of May, and closed at negative $37.63 per barrel. The negative oil price turned the net worth of Bank of China's “Futures Contract of Crude Oil" negative overnight, with an estimated loss of more than 30 billion yuan ($4.3 billion), making it one of the biggest losers of the "negative oil price" situation. Since Chinese retail investors are not allowed to directly participate in the international oil future contracts markets, the Bank of China introduced a wealth financial management product called the“Futures Contract of Crude Oil” in January 2018. The bank unifies the trading of offshore accounts so that the Chinese retail investors are able to participate in the trading of international oil future contracts.The Bank of China makes profits from managing these accounts. Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset and have a predetermined future date and price. A futures contract allows an investor to speculate on the direction of a security, commodity, or a financial instrument. Mr. Liu is a victim of the “Futures Contract of Crude Oil.” Liu said that the bank did not disclose the fact that this was a futures contract trade agreement when it encouraged the investment. He added: “The price of crude oil is lower now due to the pandemic, but the advertisement of ‘Futures Contract of Crude Oil’ is so good at persuading ordinary people to invest. This investment should not be a futures contract and I would certainly not make such an investment because the Venture Capital Testing showed that I am of a balanced type.” It is understood that “Futures Contract of Crude Oil” has always switched position during the second to last trading day, and April 21 happened to be that day, coinciding with the huge plunge of New York Oil Futures. When the Bank of China was switching, there was no counterpart at the stock market that was willing to take over. In the end, the oil closed at negative $37.63 per barrel. A Chinese finance scholar, Jia Bin, believes that Bank of China is extremely unprofessional. He said: “It was the delivery of crude oil for the month of May that they were dealing with and if they were not waiting to physically deliver the crude oil, then they should have switched the position. The other banks like the Industrial and Commercial Bank of China (ICBC) did, but the Bank of China did not. In fact, the Bank of China forgot to stop and close the position. Typically, a loss of 20 percent would require a stop and a closure, but the bank did not do that.” Netizens lashed out at Bank of China: “It is definitely a bank operational error on the ‘Futures Contact of Crude Oil.’ Not only did they fail to qualify for delivery, but also did not switch the position at all. They even allowed automatic trading. This would cost banks a lot of money in the United States, but in China, the Chinese investors would either die from bankruptcy or protesting.” Mr. Tang, one of the victims, said that he cannot accept the way Bank of China dealt with the situation. “They withheld all my money. After they deducted the principal, they further took away the rest of the money from my bank account.” he said. According to the bylaws of the Bank of China, the offshore bank accounts execute demand simultaneously when retail investors place a trade order. This financial commodity requires a 100 percent margin and is set up to offset when the loss reaches 80 percent. This means that when the principal suffers an 80 percent of loss, the investor will be forced to liq
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