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    Feb 02, 2016

    China probes $10.8b Ezubao Ponzi scheme


    CHINESE police have stepped up investigations into a 50 billion yuan (S$10.8 billion) Ponzi scheme, the largest ever busted in the country. This follows the arrest of 21 people, including its mastermind and a young female accomplice, who was gifted a villa in Singapore for her contributions, Chinese media reported.

    Zhang Min, the former president of Ezubao, China's largest online peer-to-peer (P2P) lender, also received a diamond ring, an emerald and 550 million yuan of cash from her 34-year-old boss Ding Ling, who headed the website, reported the 21st Century Economic Report online news portal.

    But all of Ding's extravagant outlays had come from money invested by more than 900,000 people in China who invested in Ezubao, believing its claim that they would receive returns between 9 per cent and 14.6 per cent, said the portal.

    In reality, Ezubao's operators fabricated most of the projects listed on the website and used funds from new investors to finance old debts, the official Xinhua news agency reported.

    Zhang, whom Ding groomed to be the website's "pretty" public face, was quoted by Xinhua as saying: "Ezubao is a complete Ponzi scheme" from a police detention centre in Beijing, where she has been kept since Jan 14.

    According to police, a sizeable part of the money raised was spent by Ding on his lavish lifestyle.

    Much money was also spent on maintaining Ezubao's huge operating costs, bad investments and advertising hype, the probe revealed.

    Police started to investigate Ezubao, which was launched in 2014, in December as it became clear that it was unsustainable.

    But the investigation entails painstaking work, including digging 6m underground to retrieve more than 1,200 account books buried by Ezubao executives in a suburb in Anhui, Ding's native province.

    Ding, who was otherwise in the business of making small metal objects, had taken up online banking following immense success by Alibaba and Tencent, China's Internet giants, the Sina news website reported.

    Ding had admitted to police that his three manufacturing companies made less than 100 million yuan of profit a year, far from sufficient to cover Ezubao's debts and expenses, said Sina.