China police bust massive S$10.8b Ponzi scheme with over 900,000 investors

A Chinese flag is seen in front of the financial district of Pudong in Shanghai, China.
A Chinese flag is seen in front of the financial district of Pudong in Shanghai, China. PHOTO: REUTERS

SHANGHAI - Authorities in China have busted what may well be the country's biggest illegal fund-raising case in terms of money and the number of investors, according to media reports on Monday (Feb 1).

Police arrested 21 people involved in the operation of peer-to-peer (P2P) lender Ezubao, the official Xinhua news agency said on Monday, over an online scam it said took in some 50 billion yuan (S$10.8 billion) from about 900,000 mainland investors.

Ezubao was a Ponzi scheme, the Xinhua report said, and more than 95 per cent of the projects on the online financing platform were fake.

 

Among those arrested was the scheme's alleged high-flying mastermind - Ding Ning,chairman of Yucheng Group, which launched Ezubao in July 2014.

The suspects are accused of luring in investors with false offers of double-digit annual returns.

Mr Ding, 34, financed his lavish lifestyle with money fleeced from investors, the South China Morning Post reported on Monday.

It said Ezubao was launched in July 2014 and embarked on a massive advertising campaign to raise funds.

On the surface, it was a P2P website with various projects, offering investors annual returns ranging between 9 per cent and 14.6 per cent. But in reality, the website's operators made up most of the projects listed on its website and used funds from new investors to pay old debts, Xinhua reported.

Chinese police said they had sealed, frozen and seized the assets of Ezubao and its linked companies.

The Ezubao case underscores the risks created by China's fast-growing US$2.6-trillion wealth management product industry, said Reuters. Many products are sold through loosely regulated channels, including online financial investment platforms and privately run exchanges.