Chasing the promise of outsized returns, 48-year-old businessman He Xiaolun started trading oil last August on a platform developed by the Shaanxi Non-ferrous Metal Exchange. Over the next five months, he lost nearly 3 million yuan ($455,000). “Initially, I lost several thousand yuan,” He said. “The exchange’s trading advisor told me to put in more money, and guided me into trading more frequently.” The exchange did not respond to questions from Reuters. The advisor said clients made trading decisions and it was not the exchange’s fault if they lost money. He and other investors say they were duped by online commodity trading platforms that have cropped up over the last few years in China. Some have been using internet dating sites to lure customers. The country’s securities regulator has said trading on such plarforms is highly speculative and therefore risky, and the cause of heavy losses for many clients. The China Securities Regulatory Commission (CSRC) also warned the “large number of complaints and disputes” against such exchanges were a threat to “social harmony and stability”. Outrage among China’s growing class of retail investors over the disappearance of their life savings has become a big headache for the stability-obsessed Communist Party after a series of financial scandals in recent years. By the end of 2015, annual spot commodities trading volume had reached $4.5 trillion on more than 350 independent exchanges in China, according to data from Euromonitor. Trading volume grew 35 percent annually from 2011 to 2015. Investment bank Jefferies estimates there are more than 600,000 active spot commodities traders in China. But while a bout of turbulence in major commodities futures markets last month triggered a swift response from regulators against “speculation”, there remains little oversight over small regional exchanges. Despite issuing its warning last month on the risks investors faced playing such exchanges, the CSRC says it is not its job to regulate them. “It’s the local government’s responsibility,” said a CSRC official in Shaanxi, central China. Disgruntled investors and some analysts say that results in frequent conflicts of interest, as many small exchanges are backed by regional governments. “These exchanges are big tax contributors to the local government, and are thus protected by them,” said Chang Chengwei, an analyst at Hengtai Futures Co. “At the same time, they’re not supervised by CSRC. This is a regulatory loophole that puts many small individuals’ money at risk.” Slowing growth is exposing cracks in China’s financial system, where defaults are spreading. Beijing recognizes the risks, and has launched a nationwide campaign targeting fraudulent investment practices. But new speculative hot spots pop up as fast as others are shut down. Many small investors piled into commodities this year after an equities bubble burst, erasing more than 20 trillion yuan ($3 trillion) from China’s stock markets. Many retail investors have ended up on regional spot exchanges as commodity trading firms ratcheted up their sales pitch, with cold calls from sales representatives promising double-digit monthly returns. Online dating sites, too, have become popular venues for the hard sell by some trading firms. Users are lured into trading commodities by someone they meet on the site, thinking they are developing a personal relationship. They often end up losing tens of thousands of yuan before realizing the relationship is strictly business. “This has become the biggest type of scam on our site over the past year,” a top executive at a leading Chinese online dating company said. The site has teams dedicated to blocking offending accounts, but they just reappear later under a new name, he said. The regulatory ambiguity is a major risk for established companies operating in the sector. Shanghai-based Yintech Investment Holdings Limited (YIN.O), which operates an online platform for customers to trade gold and silver on three spot trading exchanges, raised more than $100 million in a Nasdaq initial public offering in April. The company cited regulatory changes as one of the key risks to its business in its listing prospectus. Jefferies, which was the bookrunner for the IPO, said in a May 25 report that a “major risk to Yintech is if the Chinese government attempts to unify the regulatory bodies of the various exchanges”, but concluded that “we do not believe there is enough political will to do so in the short run”.