China¡¯s $7.6 billion online Ponzi scheme

[Randy W]

China’s HK$59 billion online Ponzi scheme: who started it, how did it happen and now what?

We give you the low-down on the massive scam involving a peer-to-peer online financing firm that fleeced more than 50 billion yuan from over 900,000 investors across China in just 1½years

 

While Ezubao’s Ponzi scheme is smaller than that of Bernie Madoff’s in the United States, it managed to raise more than 50 billion yuan in just 1½ years.

Internet financing has gained massive popularity in China in recent years as hundreds of millions of Chinese consumers discovered that they could obtain high returns through just a few swipes on their mobile phones.

Various P2P financing programmes and platforms sprouted, with the country’s internet giants including Alibaba and Tencent leading the e-finance wave with their popular wealth management products.

While the majority of the products offer genuine investment schemes and bridge real borrowers with lenders, the general public lack the information and know-how to distinguish the good from the bad.

More often than not, potential investors simply sign up for the scheme that offers the highest returns.

Ezubao offered investors annual returns between 9 and 14.6 per cent – much higher than bank deposit rates – basically promising that every penny put into its programmes would guarantee earnings.

The firm also set no threshold for investment, so people could invest even as little as one yuan in the company.

To boost sales, Ding adopted a strategy to win the Chinese market’s attention and confidence.

He spent at least 150 million yuan on television commercials, having Ezubao broadcast on almost every TV channel across China, including on the state-run CCTV.

. . .

To conceal evidence, Ezubao’s executives allegedly put more than 1,200 account books into 80 plastic bags and buried them some six metres under ground in a suburb in Anhui, Xinhua reported.

Police spent more than 20 hours digging up the evidence using two excavators.

Investigators, alongside the central bank and banking regulator, are still tracking the flow of the money.

. . .

The People’s Bank of China, along with nine other ministerial bodies, last July issued a guideline on internet finance to set clearer rules.

President Xi Jinping has listed financial risk management as one of China’s priorities for “economic work” this year.

The ruling Communist Party’s political and legal affairs committee – the agency in charge of courts and the police force – has also pledged to start a nationwide campaign against illegal financing deals and activities conducted online.

 

 

[Randy W]

. . . or in the Shanghaiist

 

Scam of the century: Nearly 1 million Chinese investors fleeced of $7.6B in online Ponzi scheme