200 Million Investors May Have Lost Everything In Largest Ponzi Scheme In China's History
Content adapted from this Zerohedge.com article : Source
by Tyler Durden
China has had its share of ponzi-like investment scheme blow ups in the past, most recently last April as we described in "Investors Rage After 3 Billion Yuan Vanish From China's Largest Private Bank" and previously in "_Chinese Investors Find Out They Got Fleeced By A $7 Billion Ponzi Scheme." _But nothing quite like this, and no, it does not involve cryptocurrencies.
According to the Asia Times, at the height of its business operations, online investment company, Qbao.com, had around 200 million registered users. With its "get rich quick" promises and tantalizing tales of up 80% returns, the company had a cult-like following with investors known as Baofen or fans of Qbao, not to mention potential clients clamoring to sign up for the financial firm's products, leading to as many as 2 million new users every day in late 2017. Even the full name of the company, Qianbao, had the veneer of success, as it translates into "money treasure."
Unfortunately for up to 200 millions ordinary Chinese, dreams of overnight riches became a nightmare when the founder of the site, Zhang Xiaolei, was placed in police custody after turning himself in just before the start of the new year.
Zhang Xiaolei, founder of Qbao.com, the online platform also known as Qianbao
He has been accused of illegally raising 70 billion yuan or some $11 billion, according to sources close to the Chinese authorities and reported in the mainland media. If those allegations are true, this would be the largest online investment fraud in China's history.
**"This shows the reality that many Chinese people are still short of money and are crazy for high-returning investment channels," **Li Chao, an analyst at market consultancy iResearch in Beijing, told the state-owned Global Times.
So "crazy" that they risk losing it all; indeed, that looks nearly certain after Zhang walked into a police station on Dec. 26 in Nanjing, the capital of East China's Jiangsu province, where Qbao.com was wheeled out in a blaze of publicity nearly eight years ago.
The authorities believe investors may have become the victims of a giant Ponzi-type scam, where new clients ended up paying inflated returns to established customers without their knowledge. Before the internet investment company was closed down, it was attracting nearly two million users every day in late 2017 from its headquarters in Shanghai. >
"Police are calling on Qbao investors in all regions to report to local public security authorities and cooperate in investigations after the company owner, Zhang Xiaolei, was [held] in custody for suspicion of an illegal fundraising crime," the company said in a statement.
Meanwhile, investors are in denial:** many clients are convinced this is all a massive mistake, **even though the online finance industry has been plagued by scandals, as Chinese regulators struggle to get grips with the problem.
In February 2016, a leading online peer-to-peer lending service, Ezubao, was accused of swindling more than 900,000 investors out of more than 50 billion yuan in less than two years. A court in Beijing later **sentenced Ding Ning, the architect of the $9 billion Ezubao online financial fraud, to life imprisonment, **which finally closed the chapter on one of the biggest Ponzi schemes in modern mainland history.
But if the allegations concerning Qbao.com and Zhang are true, this could dwarf that case.
"I became very tired of comforting other investors, some of whom were so anxious that they nearly killed themselves," Mu Qing, who became a Baofen investor, told Global Times. "But we all trusted Qbao, and we will wait [to see what happens]."
On Dec. 27, along with millions of other clients, Mu had his account on Qao.com frozen.
What happens next depends on the Chinese police investigation and the decision by the central bank to launch an inqury. It has ordered all commercial banks in Jiangsu province to roll out internal inspections for potential loans linked to Qbao.com or its affiliated companies.
"Qbao investors put all their trust in Zhang," one former executive of the company told Caixin's media website. "It was like a cult."
But that "trust" has slowly turned to disdain and anger as the details of Zhang's online world trickles into the public domain. In the end, the fall out could leave them broke in more ways than one.
Of course, investor denial will eventually turn to acceptance, but first comes the anger stage, and if indeed 200 million Chinese may have lost a substantial portion, if not all, of their net worth, the anger will be tangible and could prove to be a true black swan for a country which - as we have profiled since early 2016 - has been teetering on the verge of social unrest.
I heard the news that The authorities believe investors may have become the victims of a giant Ponzi-type scam, where new clients ended up paying inflated returns to established customers without their knowledge. Before the internet investment company was closed down, it was attracting nearly two million users every day in late 2017 from its headquarters in Shanghai.
Yes i am also heared that news bro..they invest a lot in it .after the scam they loose entire investment..present they are fought in a legel way to get their investments back
Thank you for the info @zer0hedge
I was almost expecting to see something called ChinaConnect when I opened this post.
@zer0hedge the formations that provided micro-investment over the internet were under a surplus investigation by the Chinese government. Some of the companies that were alleged to be irregularities were closely followed.
I congratulate the Chinese government. hope investors have not been victims and they have recovered their money.
It's terrible to cheat people.Maybe he needs a lot of money. very impulsive behavior must be punished severely.
Investigation by the Chinese government!! I didn't know that.
Investigation by the Chinese government!! I didn't know that.
@zer0hedge...Football score headlines capture more eye balls than talking about gov. flagrant abuse of people's rights.NSA's admitted "Ooops!" we're so sorry we washed that info from our computers even though we promised the court we wouldn't. Who would care about that??John Corzine starting a hedge fund after he collapsed a 100 year old financial company? What's that got to do with me???Football scores are vital to my life, not that other meaningless crap.And the money is never lost - merely transferred, out of China and into Australia / San Fran / Vancouver. Methinks with this going on, some of them housing speculators might actually have to sell to cover the losses out of their frozen bank accounts.Also at the end it looks like the court was skeptical enough they wanted regular reporting on who was being affected and what it was being used for, e.g. the court was in CYA mode while agreeing to permit it.My bet is when they push on the people submitting the request on the behalf of the government even a little, they'll either go 5th amendment or collapse like a house of cards.
The document shows something fucky was going on to the point the judge of a rubber-stamp court was asking questions about why.thank you for sharing with us...
NASA admitted that!! I didn't know that. Tnx for sharing.
Zhang Xiaolei, the chief of China-based online finance platform Qbao.com, wanted by a police officer, was handed over to security forces on December 28, 2017. It has been revealed that irregularities have been made and unfair earnings have been made in Qbao.com site, which has allowed investing in its members and broking more than 7.6 billion dollars to date. According to the information received, the company, which brokered more than 7.6 billion dollars, provided more than 40 percent of the proceeds from the transactions.
According to the Pymnts site, the formations that provided micro-investment over the Internet were under a surveillance investigation by the Chinese government. Some companies allegedly involved in irregularities were closely followed, and this was reported by Reuters.
The regulatory bodies responsible for reducing the risks in the online finance industry, which is popular in China, have decided to restrict the approval process for micro-investment firms. The Chinese government also said; the happiness chains have pledged to intensify the fight against financial crime in order to protect national security and overcome financial risks, depending on the increase in fraud and illegal fundraising activities.
We all want to get caught up with companies that provide unfair profits. These gains are taking you out of my pocket. I hope the states will work more. They will stop such situations.
If you take a close look at any financial investment, they are all ponzi schemes in reality!
Yikes. If it sounds to good to be true, it probably is.
Feel sorry for those that felt they "needed" to risk it all, but at the same time any investor should take full responsibility for their own exposure to risk.
Yeah I think also think so.
This is nuts, 200 million?! I should look into this some more, crazy noone saw it coming, I wonder about some of the unreported details, like why can't people get some of the money back
All this will never stop,someone has to be very careful. Nice post