It was revealed on Monday (May 16) that Chinese wealth management firm Zhongjin Capital Management has actually been used to operate a Ponzi scheme.
The New York Times reported that the country’s ongoing effort to fight systematic financial fraud was evident during a televised broadcast where a top executive from Zhongjin Capital Management came clean about the Ponzi scheme allegations.
"The way we operated our fund was with a Ponzi scheme method," Xu Qin confessed. Though a public admission of guilt was made, Xu has yet to be formally charged by Chinese authorities.
"We used money from investors who came later to pay the interest owed to earlier investors," Xu continued, noting that the operation ran similarly to traditional schemes.
It’s believed that the investment firm swindled more than 25,000 investors out of 39.9 billion yuan (approximately $6.1 billion), Bloomberg reported.
The executives of the company allegedly used the money of its investors to purchase homes, luxury goods and expensive cars.
Back in December, China’s largest Ponzi scheme, operating under the company Ezubo, was accused of defrauding more than 900,000 investors, resulting in the equivalent of $7.6 billion.
The company, said Reuters in February, grabbed attention by way of marketing efforts and the lure of “big returns.” Yet, said some executives, as much as 95 percent of projects pushed by the company were, in fact, fake.
Citing the state-owned Xinhua News Agency, the promise of returns as great as 14 percent, especially in a slowing economy and low savings rates, took in the multitudes of investors. The funds went to gilded lifestyles for company executives of parent company Yucheng Group. Among the more eye-popping gifts that changed hands: Chairman Ding Ning bought President Zhang Ming a $20 million Singapore property, a $1.8 million pink diamond ring and cash bestowments of as much as $83 million.