Security & Fraud

China Breaks Up Massive Pyramid Scheme Involving 82 People

China

China has arrested 82 people as part of the busting of a $1.51 billion online pyramid scheme that involved more than 220,000 investors.

Reuters, citing the official Xinhua news agency, reported that the scammers drew in investors from Hong Kong, Taiwan and Southeast Asia, as well as mainland China. Prosecutors have 52 suspects who are accused of organizing the pyramid scheme and leading it. The suspects allegedly set up hundreds of shell companies and promised investors high returns.

Earlier this year, a Chinese court sentenced two people to life in prison for fraud, with 19 others getting up to 12 years in prison for their part in a pyramid scheme.

According to news from Reuters at the time, the two key people in the scheme, Huang Dingfang and Cai Keyi, were convicted at the Hangzhou Intermediate People’s Court for conning more than 200,000 people out of 15.6 billion yuan ($2.39 billion). In addition, 19 others involved in the fraud were given sentences of up to 12 years.

China has launched a campaign to put an end to pyramid schemes. Cases investigated in the first nine months of 2017 involved nearly 30 billion yuan. In that pyramid scheme, Huang set up Longyan E-commerce Co. Ltd. in January 2015 and worked with another company owned by Cai to scam people out of their money. The duo promised annual returns of more than 250 percent to investors, who contributed 4,000 yuan each. A third firm was then created to sell shares, with the promise that it would go public in the United States. The court said it ordered the 21 defendants to return over 5.7 billion yuan to more than 170,000 investors.

In the fall, a court in Beijing handed down a life sentence for the mastermind behind the $9 billion Ezubao financial internet scam and sentenced 26 others to jail time. According to a Reuters news report, sentencing brought a close to one of the largest Ponzi schemes to happen in China. As the government steps up against risky and illegal behaviors in the financial sector, it is handing down tough sentences and regulating industries.

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