Police in China have arrested 21 people involved in an online financial scam suspected of defrauding 900,000 alleged investors of 50bn yuan (£5.31bn).
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In reality, the platform, which was set up by the Yucheng Group in July 2014, was used to enrich top executives, Xinhua said. It also mentioned that state investigations revealed that more than 95% of the investment offerings on the site were fake.
Police raided the company, based in the eastern province of Anhui, after discovering that its executives were transferring funds and planning to flee, Xinhua added.
Experts have long fingered China’s big shadow banking sector as a potential problem for the world’s second-largest economy.
“The truth is that it’s a fraud … it’s a typical Ponzi scheme”, Zhang, the associate, said in her aired confession.
China’s peer-to-peer growth or P2P, lending has increased, with Morgan Stanley estimating its volumes in 2015 that totaled over $33.2 billion, led the U.S.
Xinhua reported that the company would pay off old debts when it received capital from new investors.
Ezubao has risen from obscurity in the past two years as the most spectacular player in a booming online investment industry that Chinese authorities have been struggling to regulate.
The Ezubao website has been shut down and its Beijing offices appear to have closed, with investigators confirming they have seized and frozen the company’s assets.
Ezubao promised annual returns of between 9 per cent and 14.6 per cent. Like other peer-to-peer platforms, it promised higher rates by matching individual investors with other people who needed cash for an investment or business.
Even more interestingly, Ding Ning was apparently romancing the chairman himself with such gifts as a 12 million yuan diamond ring and a 130 million yuan villa in Singapore. And to maintain a good reputation among investors, a lot of money was spent on luxury clothes for Ding’s female secretaries.
Officials at the company could not be reached for comment.
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The intention to spend the money for themselves constitutes crimes of illegal use of public funds and fundraising fraud, said Guo Hua, a law professor at the Central University of Finance and Economics.
