So far, there have been no reports that mainland Chinese investors were among the thousands victimized by the US$50 billion (S$72.3 billion) Bernard Madoff pyramid scheme now shaking Wall Street.

But China has plenty of such scandals of its own, and it intends to crack down to prevent further problems, according to a notice seen on Tuesday on the Web site of the National People's Congress, the national parliament.

It said the parliament's Standing Committee has begun discussing a law targeting such crimes.

Regulations issued in 2005 that banned pyramid selling apparently were not powerful enough.

'In China, such scams have led to social and security problems, including robbery, kidnapping, theft and illegal detention,' the official Xinhua News Agency reported.

It said the draft law called for a minimum prison sentence of five years, in addition to fines, in serious cases.

The law would also ban unauthorised dealing in securities, futures and insurance products, and tranfers of large sums of money between entities not authorised to conduct such transactions, such as pawn shops and consulting firms, it said.

Authorities uncovered 42 cases of so-called underground banking between Sept 2007 and Sept 2008, involving a total of 84.4 billion yuan (S$17.8 billion), Xinhua said.

A Ponzi scheme, or pyramid scheme, is a scam in which people are persuaded to invest in a fraudulent operation that promises unusually high returns. The early investors are paid their returns out of money put in by later investors.

Last month a man was executed for running a scheme that promised returns of up to 60 per cent to 10,000 investors who bought ant-breeding kits from companies he ran. The ants ostensibly were to be used in traditional medicinal wines and herbal remedies.

Investigators shut down his companies, and only US$1.28 million of the US$416 million lost in the scheme was recovered. -- AP