China Ponzi Scheme

September 2016

China Ponzi Scheme

Ronald H. Levy
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514 878-3251

Do you remember the old saying, “If it seems too good to be true, then it isn’t”?

If you did, then you are ahead of the approximately 900,000 mainland Chinese who fell victim to a recent Ponzi scheme1 which plagued China.

According to the South China Morning Post, over 50 billion yuan, yes, that is with a B, were stolen from the over 900,000 victims.

The so-called business was an e-finance platform that allowed peer-to-peer investing and borrowing. Peer to peer lending, as you would think, arranges for direct loans between strangers at interest rates that are lower than the borrower would pay to a traditional financial institution. As for the lender, this arrangement allows for a return that is higher than traditional investments would generate. These loans, even ones arranged through legitimate sites, are not guaranteed in any fashion, whether through government programmes or otherwise.

This scam took full advantage of mobile technology and allowed the “investors” to easily and quickly transfer money, with no minimum threshold, with the promise of returns of between 9% and 14.5%. This in a financial environment where the public could only obtain returns that were substantially less!

According to news reports, to provide the needed credibility, the people behind the scam purchased, at least 150 million Yuan of television advertising.

So, the moral of the story is, there is no free lunch, following the crowd is not always the best way to choose investments and if it seems too good to be true…

This philosophy applies to all types of investments, from real estate to private company shares, and even commercial contracts with both known and unknown contacts. The best way to protect yourself and your money is to consult a professional that can guide you and ferret out which promises are real and which are not.

You have been warned.

1 A Ponzi scheme is a form of fraud, named after its first proponent, Charles Ponzi, in which high returns are provided to early “investors” funded by money from later entrants.


Ronald H. Levy, Litigation partner, De Grandpré Chait

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