By James T. Areddy
Updated April 16, 2016 5:33 a.m. ET

SHANGHAI—A crisis rocking a loosely regulated lending network is underlining the risks of a financing boom that has channeled Chinese household money into Hollywood movies and Wall Street deals.

Droves of teary-eyed investors from around China have descended on Shanghai Kuailu Investment Group’s swanky offices over the past week to demand their money back after the firm halted redemptions on wealth-management products for the roughly 250,000 clients of the firm and three affiliates.

The uncertainty around investments handled by Kuailu could force a re-evaluation of a financing trend that has become widespread, in the latest knock to a financial system damaged by months of stock-market turmoil and a slowing economy.

Kuailu is one of thousands of finance companies in a universe of Chinese “shadow banks” that funnel investors’ funds to businesses and individuals, often with an assurance of high returns. Moody’s Investors Service estimated credit extended by nonbank financing companies in China stood at $370 billion in mid-2015. Many Chinese refer to ​the diverse industry using English: “P2P,” as in peer-to-peer lending, though that business of matching small lenders and borrowers is just one segment of operations at Kuailu.

Kuailu isn’t the first such lender to leave investors hanging amid recent collapses in the sector. What is distinctive is how its problems are exposing an international dimension to the industry, which bankers said is common but little understood.

The Shanghai firm invested in at least 20 feature films, including the coming release of “The Bombing” starring Bruce Willis, according to the company. Client money holds a slice of a $9 billion deal to privatize New York Stock Exchange-listed Chinese Internet-security company Qihoo 360 Technology Co. , firm marketing documents show.

A crisis-management specialist that Kuailu’s founding chairman this month put in charge of sorting through $1.5 billion in liabilities told The Wall Street Journal it wasn’t a Ponzi scheme, a fear some investors have raised with the company.

“No cash flow. That’s the issue,” said Xu Qi, who estimated assets cover about 90% of what is owed to investors, but that most of it is tied up in investments or projects that can’t be quickly converted to cash.

Companies like Kuailu got their start in peer-to-peer lending, initially a modest effort to supply money to Chinese households and entrepreneurs that was endorsed by top government officials as a way to power new streams of consumer activity.

But crowdsourced lending has quickly expanded and now powers financing across China, from wedding loans to land speculation. Like banks, but with less regulation, such lenders compete aggressively for deposits, often via online platforms. Many attract money faster than they can thoroughly research investments, according to analysts.

The turmoil around Kuailu follows the collapse in recent weeks of shadow lenders in other cities and emerged just as Shanghai authorities shut a peer-to-peer lending network, according to China’s official Xinhua News Agency.

Many of Kuailu’s investment products promise high returns and redemption after a few months, according to company contracts reviewed by the Journal, but investors said few understood that the company’s success hinged on long-term projects. The mismatch made Kuailu’s business model fundamentally flawed, said Mr. Xu.

In Hollywood, the firm’s now-absent founder and former chairman, Shi Jianxiang, cultivated relationships with celebrities like Mike Tyson and Sylvester Stallone, according to people who know Mr. Shi and images on the company website. Mr. Xu termed Hollywood Mr. Shi’s “personal desire.”

The firm pushed its products by bundling them with tickets to movie screenings, vacation vouchers and galas, offering big spenders the chance to hobnob with film stars like Oscar-winner Adrien Brody, according to investors and the firm’s publications.

Its Wall Street links are newer and not as deep, according to marketing materials reviewed by the Journal, which show how Kuailu put money into a strategy built around Chinese companies delisting from U.S. exchanges to relaunch on domestic markets. Company documents said the Qihoo deal could return up to 415% on investments that started above $155,000.

Kuailu investors are now gathering daily at its offices to complain that they were conned by sales agents who played up the potential for high returns on funds peddled by Kuailu and its affiliate brands, including Jinlu, Hongqiao and Intraday, also known as Dangtian, while playing down the difficulty of profiting on some deals.

Mr. Xu, who said he has no financial stake in Kuailu, said the group was careless in valuing assets and likely skirted fund-registration rules meant to protect investors from fraud. He said the nationwide sales network under several different brands—the headquarters of Jinlu and Dangtian are a floor apart—was designed to make the firm look smaller than it is.

A Shanghai government spokeswoman declined to answer questions about regulatory oversight of Kuailu or the impact of its troubles. Mr. Xu said he is in daily contact with local financial regulators.

On Tuesday, about 500 investors squeezed into a Kuailu ballroom to seek answers. Mr. Xu said few of them could expect any money before July; the firm’s official statements extend the repayment timeline to March 2018.

Business-registration filings show Mr. Shi founded Kuailu as an offshoot of a state-owned wire maker in 2003. Last year, Mr. Shi’s net worth was put at $750 million by Shanghai wealth-tracking firm Hurun Report. He is now hospitalized with a serious heart condition in Hong Kong, according to Mr. Xu.

Mr. Xu said Kuailu’s cash-flow problems worsened in March after government regulators alleged movie houses fraudulently inflated box-office receipts for “Ip Man 3,” a martial-arts movie starring Mr. Tyson and funded in part by financial products sold through Kuailu’s network.

Mr. Xu said Kuailu’s well-known association to the film hurt its reputation and prompted its banks to cancel credit lines in March.

Later in the month, a signal from China’s central government that it had shelved plans for a new stock-trading platform in Shanghai meant another setback for Kuailu, which had marketed the new board as a route for its investors to profit on the Qihoo privatization.

Qihoo, which recently won U.S. shareholder approval to take itself private in the first step of its homecoming plan, didn’t respond to questions. Mr. Xu said Kuailu’s portion is fractional and shouldn’t affect the privatization.

This week, investor Li Lin pushed her way into the executive offices of Kuailu’s Dangtian affiliate and kicked a door marked “chairman.” The 32-year-old Ms. Li, who is five months pregnant, shouted that she wanted her money back and brandished contracts that showed she made deposits of about $39,000.

Ms. Li said she began investing with Kuailu after its salespeople visited her apartment toting a portable credit-card reader and concert tickets as gifts, including for a show with Hong Kong heartthrob Ekin Cheng.

“There is a Chinese saying: Gifts blind the eyes,” Ms. Li said. “After receiving these free tickets, I felt somehow obliged to buy their products.”

—Yifan Xie in Shanghai and Lilian Lin in Beijing contributed to this article.