Fintech Ponzi Scheme Revealed in China
A potentially disastrous blow to China’s already struggling financial technology sector has just been revealed.
Online peer-2-peer lender Ezubao has been accused of wholesale fraud to the tune of $7.6bn, with more than 20 high-level employees arrested.
In the month preceding the arrests, the Chinese government froze Ezubao’s assets, stirring the bee hive of the company. Now reports are emerging showing the true nature of the young firm’s fraud.
According to reports, Ezubao flat out lied to more than 1 million customers about the range of products it was selling, with up to 95 percent of all products being fake.
The P2P firm told clients that they could potentially receive between 14 percent to 17 percent return on investment on P2P loans. Once Chinese investigators looked into the company, they discovered that most of the executives were receiving large salaries and lavish gifts.
They also discovered that Ezubao’s founder, Ding Ning, had purchased a $20 million villa in Singapore for the president of Yucheng Group, the owner of Ezubao. Zhang Min, president of Yucheng Group, also received a $1.8 million pink diamond ring.
The news of such an obscene Ponzi scheme in China’s financial technology sector has rocked many investors’ confidence.
With China’s economic slowdown, many are questioning the future of the country’s financial sector, with many predicting extreme buyouts and consolidations. This is the latest of a series of crackdowns on corporate corruption in China, but the damage may have already been done.