Financial Fraud Against Private Investors Continues Rising
Fraud targeting private investors still thrives in China despite tightening government crackdowns on financial crimes, the country’s top procurators said Thursday.
Financial crime in general has declined since 2017 amid toughening oversight, but scams aimed at random retail investors have been rising, leveraging the internet and innovative tactics, according to the Supreme People's Procuratorate.
In 2017, procurators in China brought 35,301 suspects to court in 21,842 financial crime cases. The number of individual prosecutions was down 3% from 2016, and the number of alleged crimes fell 7.9%. In the first half this year, an additional 8,728 cases were filed.
However, crimes targeting private investors, such as fundraising fraud, illegal deposit-taking and pyramid schemes, increased significantly. For instance, the number of cases related to pyramid schemes rose to 2,233 in 2017, up 38% from 2016, according to data released Thursday by the Supreme Procuratorate.
Scammers have increasingly used the internet and sophisticated network arrangements to reach a vast number of investors, making it difficult for regulators to track and identify, said Wan Chun, the policy research head at the Supreme Procuratorate.
The Procuratorate provided details of several high-profile cases Thursday. In the fundraising fraud case of Zhongbao Investment, company founder Zhou Hui was accused of setting up an online peer-to-peer (P2P) lending site and fabricating investment projects with promises of high yields to attract investors. Zhou collected more than 1 billion yuan ($150 million) from private investors and embezzled the funds for private spending, prosecutors said. He was sentenced to 15 years in jail for fundraising fraud.
Zhou’s case reflected how financial scammers used internet financial innovation, said Zhao Baoqi, a procurator from Zhejiang province who led the investigation of the case.
In another case, Shanghai businessman Ye Jingsheng set up websites to spread pyramid schemes that attracted more than 30,000 members and involved 150 million yuan.
China’s financial regulators have stepped up the fight against internet-related crimes since 2016. Earlier this week, the central bank said it will extend a two-year-old crackdown for one to two years against online financial violations to root out illicit practices.
A number of damaging financial fraud cases made headlines over the past year, including P2P scammer Qbao.com, which was accused of illegally raising 70 billion yuan, and the pyramid sales group Diebeilei, which used online job hunting sites to lure young members.
Contact reporter Han Wei (firstname.lastname@example.org)
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