The probe means uncertainty continues to loom over the future of Ant and controlling shareholder Mr. Ma. The usually flamboyant entrepreneur has kept a low profile since the IPO was stopped last-minute in November. He won’t be allowed to leave China until Ant completes a business overhaul ordered by regulators and the government’s investigation is over, the people say.

In the eyes of China’s top leadership, Ant’s business model, in which lending is driven by big data, endangers the country’s financial system—in part because the company’s banking partners assume most of the risk. Leaders are also concerned that those who stood to benefit from what would have been the world’s largest IPO include a coterie of well-connected individuals and institutions, some influential political families in China and big state funds.

Mr. Ma managed to push the Ant IPO application through various levels of securities regulators in a relatively short time—even as banking regulators were voicing concerns about the business model and were preparing tougher regulations for companies like Ant. The wait to be listed in China is often many months or longer.

“What happened is deeply embarrassing for regulators because they should have more effectively coordinated before approving the IPO,” says

Martin Chorzempa,

a research fellow at the Peterson Institute for International Economics who specializes in China’s financial-technology sector.

“By not doing so,” he added, “they were stuck in a lose-lose situation of either the last-minute pause or, worse, forcing massive losses on IPO investors by changing the regulatory stance post-IPO.”

Since halting Ant’s IPO late last year, President

Xi Jinping

has presided over one meeting after another in which he stresses that big technology firms must be prevented from using their size, capital and troves of data to engage in anticompetitive practices. He has urged underlings to target the financial sector this year for any impropriety.

Listing standards and procedures set by both the China Securities Regulatory Commission and stock regulators in Shanghai are now under scrutiny.

One focus is Shanghai’s STAR Market, where Mr. Ma had planned to list Ant, along with Hong Kong’s stock exchange. Initially, the STAR board was seen as a savvy choice. It was created at the height of the U.S.-China trade war to help Chinese tech companies raise money and better compete with their American peers, and local officials and securities regulators knew its importance to the top leadership: Mr. Xi himself had announced the decision to launch in late 2018. According to officials with knowledge of the process, one of the few people he had discussed the STAR plan with before the announcement was Shanghai Communist Party chief Li Qiang.

Mr. Li is seen as a rising political star, trusted by Mr. Xi. But as a former governor of Zhejiang province, home to Mr. Ma’s empire, Mr. Li has also been supportive of the entrepreneur and his businesses.

In 2018, the Shanghai government signed a strategic-cooperation agreement with both Ant and Alibaba Group Holding Ltd., the e-commerce giant founded by Mr. Ma. In a meeting with Mr. Ma around that time, according to a release by the Shanghai government, Mr. Li and Shanghai’s mayor both pledged to “fully support” Mr. Ma’s business in the city. Inside Ant, the code name for the company’s listing plans was “Project Star.” And Mr. Ma’s plan to list Ant on the new Shanghai board sailed through the regulators.

The local securities watchdog in Zhejiang spent about a week in mid-2020 reviewing and advising on the IPO plan. On Aug. 25, Ant submitted its listing prospectus to the STAR Market and to the stock exchange in Hong Kong. Less than a month later, Shanghai regulators completed their audit of the application, enabling Ant to jump ahead of earlier applicants.

The probe also examines how an array of state funds, including massive sovereign-wealth fund China Investment Corp. and the country’s largest state insurers—among them

China Life Insurance Co.

—got to invest in Ant, the people familiar with the matter say. The mandate of CIC, for instance, is to invest overseas rather than domestically.

Representatives of the securities regulators, both for the central government and in Shanghai, the Shanghai city government, China Life and CIC didn’t respond to questions. Ant declined to comment.

Mr. Xi has been wary of his government’s financial stewardship since coming to power in late 2012. A stock-market crash in 2015, which reverberated around the world and prompted massive state intervention, deeply embarrassed the leader. More recently, an enormous state firm tasked with cleaning up bad debt, China Huarong Asset Management Co., itself has been mired in hundreds of billions of dollars in debt due to a history of mismanagement.

The way Ant’s IPO application was handled fueled Mr. Xi’s concerns the state’s interests weren’t being adequately protected.

Complaints to regulators about Ant’s IPO-marketing process didn’t markedly slow down the approval process. At issue was the way the company used its popular Alipay payment app to raise nearly $9 billion from individual investors in five mutual funds that planned to subscribe to the IPO. Some banks complained that the arrangement essentially meant the company was underwriting its own IPO.

Ant at the time denied any impropriety, saying the mutual funds operated independently and made their own investment decisions, and that the related details were fully disclosed. Having looked into the matter, the China Securities Regulatory Commission in late October greenlighted the Hong Kong portion of Ant’s listing plan—the last regulatory approval needed for the stock sale.

“The Ant IPO incident shows that certain rules and regulations are still lacking as we develop the financial markets,” says an adviser to the State Council, China’s cabinet. “Financial security must be ensured.”

In a January speech at the Central Commission for Discipline Inspection, Mr. Xi singled out the financial sector as an area of focus his year.

“It’s necessary to continue to cement the main responsibilities of financial-management departments, regulatory agencies, local party committees and governments,” he told the country’s top graft busters.

The probe of the Ant approvals started soon after. It isn’t clear whether any individual involved in approving or otherwise facilitating Ant’s IPO will be held accountable, the people familiar with the investigation say.

So far, the probe has led the China Securities Regulatory Commission to tighten the STAR Market’s listing requirements to ensure that only companies whose main business is technology are traded there. After Ant’s IPO plans were scuttled, the five mutual funds that had raised funds to invest in the deal returned more than $3 billion to investors who wanted their money back.

An upshot, say analysts: Ant, which is being revamped as a financial holding company subject to the same kind of regulations as banks, is unlikely to gain approval to list on STAR in the future.

In Shanghai, the mood has shifted. At the city’s Pudong International Airport, a poster by the local government pledges adherence to Mr. Xi’s directives. It features chess pieces, including a white king with the words “strengthening implementation of antitrust laws” running along its base. The king hovers over a black knight with a horse’s head.

Mr. Ma’s last name means horse.

Write to Lingling Wei at lingling.wei@wsj.com