Guangzhou | 24 jailed over billion dollar fraud

A court in Guangdong province has jailed 24 people for fraudulent fund-r­aising of over 9.9 billion yuan (about USD1.5 billion), cheating more than 230,000 victims, mostly elderly people, from 2002 to 2012, the Xinhua state-­run news agency reported yesterday citing the court ruling.
The main suspect, Jiang Hongwei, was sentenced to life in prison while 23 others received jail terms ranging from three to 14 years at Guangzhou Intermediate People’s Court.
The group set up four companies in Guangzhou, many branches and subsidiaries across China, raising funds by tempting members of the public into buying membership cards or funding nonexistent loans, by promising returns as high as 47 percent.
According to Xinhua, many elderly victims who put their savings into the scam burst into tears at the trial. Some said they were attracted by the company’s “novel modes of financial services” and fooled by their fancy exhibitions.
“Their grand exhibition occupied six halls. After attending it, I felt assured and decided to invest 700,000 yuan,” said one elderly woman from Jiangsu Province. “It was all the savings of me and my husband.”
The court has frozen the fraudsters’ personal accounts and seized their assets, including 127 vehicles and 43 villas, but prosecutors said many victims might not be able to get their money back as Jiang had squandered millions on luxuries and failed to disclose where other funds had gone, the state run agency added.
China’s central government earlier this month promised severe retribution against illegal fund-raisers after Ezubao, an online peer-to-peer platform, was found earlier this year to have cheated about 900,000 investors out of more than 50 billion yuan ($7.6 billion) through fake investments. An executive from the parent company has admitted that it was nothing but a Ponzi scheme.
Financial Times correspondents in China wrote in a dispatch yesterday that the case highlights the financial risks of the loosely regulated wealth management products industry, which often targets retail investors who have little financial sophistication. “Beijing is concerned that popular discontent at such frauds will spill over into social unrest.”
The Chinese government “already on the defensive over its management of the plummeting stock market and the slowing economy, is worried that financial scandals could threaten banking sector stability.”
P2P lenders, which grew out of investor hunger for wealth management products, are supposed to invest the money they raise into financial products issued by third parties such as property developers. According to industry estimates, as many as a third of China’s 3,800 registered P2P lenders have run into financial difficulties as economic growth slows.
Last year hundreds of angry investors protested in Beijing and Shanghai after losing $6 billion from the Fanya Metals Exchange, which offered investment products promising an annual return of up to 14 per cent, the FT reported. MDT/Agencies