Two years ago, Stephen Green, an economist now working in Shanghai at Standard Chartered bank, wrote in his book "China's stock market: A guide", that the ability of the government to supervise itself would prove the key question for China.
He wrote, "The overwhelming question is... in the absence of liberal democracy, what will drive the improvement of stock market regulation in China?"
It was a bold question, rarely asked by the number crunchers who habitually concern themselves with China's financial markets, and many believe it stil remains far from answered.
Indeed, some now argue that China's regulators - the China Securities Regulatory Commission and the China Banking Regulatory Commission - were not only slow to discover what D'long was up to, but may also now be giving the guilty parties a relatively easy ride.
They believe it is the government's difficulty in policing itself that contributes to inefficient supervision, while its monopoly on information is allowing it to minimize the losses, and hence the extent of the investigation.
The alleged brains behind the ultimate holding company, D'long Strategic Investment, CEO Tang Wanxin is now co-operating with the government to resurrect the conglomerate and could theoretically get off with just a three-year sentence and a fine. This either be for operating as an illegal bank (attracting deposits at higher than mandated interest rates and lending them out again), or illegal capital raising - implying that the funds were raised under false pretences and re-invested in the business.
Where the latter point is concerned, China's criminal law states that the punishment for a severe case is a maximum five to 10 years in jail and a fine of not less than Rmb 50,000 and not more than Rmb 500,000. Where the former is concerned, again assuming the case is classified as severe, the punishment is three to ten years and a fine of Rmb 50,000 to Rmb 500,000.
Mainland media have recently carried reports, citing unidentified officials, that Tang will be charged with the lesser crime of acting as an illegal banker, but with no mitigating circumstances. That could mean between five to 10 years.
Mysteriously, despite their involvement in the running of the conglomerate, nobody else from the family is to be charged. This includes Tang Wanli, who co-founded the company with his brother and was once chairman of the board of directors of the ultimate holding company. His currently under house arrest in Beijing.
Two other brothers are also involved - Tang Wanchuan who is reportedly ill and in hospital and Tang Wanping, who has left the country. Neither founded the company, but both joined later after the original, non-family founders were bought out.
There is also one sister, who works at the Beijing Friendship Hospital as a nurse, but who was apparently not directly involved in the company.
In the economic style favoured by the mainland government, the prosecution is focusing on one offender and blaming him for everything. But critics argue that while Tang Wanxin may have been involved in all sorts of wrongdoing, it is highly unlikely he was guilty of all the offenses by the conglomerate as it grew. This came mainly through (often illegal) debt and (often artificially boosted) stock-funded M&A - from neighborhood photo processing shop in the impoverished West of China to a stock market heavyweight.
With the investigation stopping short even of the family members involved in running the company, it is not surprising there is no mention of an investigation into the activities of numerous state sector banking officials and supervisors who were meant to prevent such a scandal.
Yet it is clear the offenders in the D'long case need to be made an example of, say lawyers close to the deal.
The case was very frightening for the government as well as for mainland investors. For many months it contributed to the decline in the mainland's stock markets' key indices.
The main reason for the sense of panic was that nobody in government had any idea about the scale of the disaster waiting to unfold. Some tense weeks went past last year while revelations of D'long's techniques for raising huge sums through leveraging its stakes in its 170 subsidiaries, and plundering its in-house securities companies, leaked out.
"The case should unfold in view of the public. Everything should be revealed and the perpetrators should get a sufficiently severe punishment that actually discourages people from committing such crimes, instead of the usual small fine," says one mainland lawyer.
Despite the systemic risk unleashed by the greed of the Tang clan, lawyers say the precedents are not very encouraging.
In the most recent high-profile case of economic crime, Shanghai real estate developer Zhou Zhengyi, was sentenced to just three years in jail for raking in tens of millions of dollars in illegal loans; while the banker who facilitated those loans, the Bank of China's Liu Jinbao, has not even been formally charged.
Another factor is that Tang probably cut a deal with the government before he returned to China in December after his disappearance last April. A final factor is that the government is nervous about broadcasting the full extent of the bubble Tang created in case it destabilizes China's fragile financial system.
Thus, mainland media have been downplaying the amounts involved with one leading economic newspaper, the 21st Century Business Herald, suggesting it could be as little as Rmb 10 billion ($1.2 billion).
Yet this loss refers only to the amounts involved in the company's three securities companies and one trust company, all of which were involved in illegal activities such as appropriating customer funds. Reports last year in the same paper drew attention to the nature of the guarantee system, whereby companies tell the creditor bank they will take on the liability in the event of a default of the partner company.
Such guarantors get a fee and use their stock price to collateralize the loan, thereby encouraging the manipulation of share prices. It was stock price manipulation, which was the basis of Zhou Zhengyi's conviction last year.
The guarantee system is extremely dangerous in the wrong hands, because it is difficult for investors to know what guarantees a company has made. A perfectly sound company could be brought down by reckless guarantees to an unsound company. Worse, companies often guarantee each other, leading to a potential chain reaction. Guarantees are especially frequent among the growing number of listed private or quasi private companies who are frozen out by the banks.
Interestingly, the company is not being pushed towards bankruptcy.
Bankruptcy is a last resort in China, primarily to safeguard the small stock investor, who would otherwise be put behind the company's bank and trade creditors with regard to repayment.
Indeed, one of the conditions of Tang's return to China is that he will strive to turn D'long around.
Most surprisingly, Tang has even kept ownership rights to his assets, meaning that Huarong asset management company (AMC) must obtain his agreement before making decisions.
That must be galling to the AMC officials, who come from Industrial and Commercial Bank, D'long's biggest creditor.
The central bank has announced that it will not take over the company's debts to companies and institutional investors. That means the company is on the block, waiting for domestic, or even foreign buyers, say observers.
In summer last year, two mainland state owned enterprises, China National Cereals, Oil and Foodstuffs Corp (COFCO) and China's leading non-ferrous materials company, Sinoma, took stakes in one major subsidiary, Xinjiang Tunhe. The former paid up to Rmb 400 million to acquire a stake in the tomato grower and tomato paste manufacturer, while the latter injected Rmb 260 million.
Being SOEs it is difficult to say if they saw a good commercial opportunity, or were instructed by the government to provide a cash injection.
In any case, these transactions are being re-examined in the wake of the scandal.
The central bank has been forced to pay out compensation to individual investors, although it hopes to regain these funds from the company which buys D'long.
Given the apparent unwillingness of China's supervisory system to clamp down on abuse, it would be wise for the central bankers to prepare themselves for pay outs.
