Big scam with a classic Ponzi scheme in China. Beijing authorities have arrested 21 people suspected of organizing a 50 billion yuan ($7,6 billion) financial fraud against nearly one million investors. The suspects, members of one of the country's largest online investment firms, Ezubao, offered clients investment packages with the promise of annual interest between 9 and 14,6% on various projects.
The online platform, launched in July 2014, had already raised 50 billion yuan in December. The Ezubau site was shut down and all of the company's assets were seized. Chinese police raided the company's headquarters in eastern Anhui province after discovering its executives were transferring funds outside and planning to escape.
The Ponzi scheme ensures strong short-term returns for early investors, but expects to pay them interest with the fees paid by new investors. It is a sort of reverse chain letter that can only work until a certain number of shareholders ask to withdraw their capital.
