China Breaks Up World’s Biggest Ponzi As CEOs Keep “Disappearing”.

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The largest ponzi scheme in the world – both by asset volume and the number of victims – has just been broken up after interdiction from China’s authorities revealed fake peer-to-peer lending that fleeced investors in the region of 50 billion Yuan, or $7.6 billion. The arrests of senior executives at Ezubao, the Chinese firm alleged to have bilked nearly 900,000 customers, come as Chinese executives are being kidnapped at an increasingly alarming rate and regulators in the region are cracking down on fraud.

Investors promised returns on peer-to-peer loans, but money went for gifts, cash, sources say

Ezubao promised investors what were generally above average investment returns, between 9% and 14.6%, while in actuality 95% of the investments listed on the site were false, according to a confession made by Yong Lei, the company’s risk controller, and reported by the Xinhua news agency. Like most peer-to-peer lending sites, the firm worked as a matchmaker connecting those in need of loans with investors looking for yield in a yield starved environment.
Protests from investors erupted after police in December opened an investigation and then froze the web site’s assets, leaving lenders unable to get their money returned.
A Quartz report, citing Chinese sources, allege that executives spent millions on personal extravagances such as diamond rings, other gifts and cash. When new investors looking for yield came to the site, they would take their money and use it to pay out investors who wanted to cash out.

Unrest throughout China

The economic and political climate in the region is taking a decidedly unusual turn, as Michael Posner, a professor at the NYU Stern School of Business, notes executives in the region are simply vanishing:
Though it has received far less attention, another more ominous sign of trouble is the “disappearance” of senior executives from at least 34 Chinese companies over the last year. On Jan. 7, billionaire Zhou Chengjian, the Chairman of Metersbonwe, one of China’s leading clothing companies, vanished. The company issued a statement saying it was looking into reports that he had been picked up by the police. Ten days later, he returned to work along with Tu Ke, the Company’s Board Secretary.

It is not always clear if such disappearances are due to Chinese officials “interrogating” suspects or other reasons. When Guo Guangchang, the Chairman of Chinese firm Fosun went missing, the company said he had been “assisting in certain investigations carried out by judicial authorities.”

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