The firm has been in trouble for some time so this was not unexpected. They are a wealth management firm who were very heavily exposed to the property sector. As they are not part of the formal banking system this won't lead to a liquidity crisi / run on banks - at least not on its own.
Investors will get some funds back - possibly as low as 30% but knew, or should have knowen, what they were getting into. Chinese authorities are investigating the firm and penalties are likley to be severe if it is proven that there was misselling or fraud.
www.cnbc.com
