The decision to sell the stockpiles of indium, a silvery metal used in flat-panel displays and semi-conductors, was made by the Kunming Intermediate People's Court in mid-December, an investor in the exchange campaigning for the restitution of Fanya funds, who received a notification from the court, said on Friday.
The court has not disclosed the information publicly on its website.
The metal sales will take place on the Kunming court's official account on the auction section of Taobao, a Chinese e-commerce platform, from Jan. 28 to Jan. 29, according to a listing on the Taobao website.
The Fanya Nonferrous Metals Exchange was launched in 2011 in Kunming in southwest China's Yunnan province with the express purpose of raising the prices of minor metals like indium, germanium and bismuth by building up stockpiles using money borrowed from thousands of individual investors.
But, the exchange froze transactions and members' accounts in 2015 after experiencing "liquidity" problems, and was later taken over by government investigators. Angry investors protested outside the exchange in Kunming and at the offices of China's financial regulators in Beijing and Shanghai.
After a news blackout, state media and the Chinese courts broke their silence last July to announce the trial of Chairman Shan Jiuliang and 20 others. The court has not announced a verdict, even though local police already ruled that "criminal activities" had taken place.
A London-based metals trader with knowledge of the indium market said the decision to sell the material through a public auction was surprising, with indium prices close to historical lows.
"A move like this would have made much more sense when prices were nearing $350/kilogram at points in 2018," she said, adding that the price is likely to drop before the bidding even begins next week.
Indium was trading at 1,475 yuan ($217.74) per kg on Thursday, according to Chinese industry data provider Shanghai Metal Exchange Market, having fallen by 7.2 percent since early December.
The Fanya investor said former investors in the exchange had not been allowed to attend court proceedings, and opposed any move that forced them to accept losses. A Kunming court official, who would only give his surname Li when contacted by Reuters on Friday, denied suggestions that investors were not allowed to participate, adding that the auction was a public event.
"The auction of the Fanya inventory will greatly damage the market price of the underlying metals," said the investor, who did not want to be named, citing the sensitivity of the matter.
"We will continue asking for the full repayment of our initial lending to the borrowers on the Fanya Metal Exchange," he added.
(Reporting by David Stanway in SHANGHAI and Tom Daly in BEIJING; additional reporting by Cate Cadell in BEIJING; editing by Christian Schmollinger)
By David Stanway and Tom Daly
