Make us your home page
Instagram

China company accused of fleecing investors of $7.6 billion

In this image made from video by China Central Television, police escort Ezubao owner Ding Ning after his arrest on suspicion of fleecing 900,000 investors of $7.6 billion in what could be a record fraud in China.

CCTV via AP Video

In this image made from video by China Central Television, police escort Ezubao owner Ding Ning after his arrest on suspicion of fleecing 900,000 investors of $7.6 billion in what could be a record fraud in China.

BEIJING — Police arrested the maverick founder of China's largest online finance business on suspicion of fleecing 900,000 investors of $7.6 billion, in what could be the biggest financial fraud in Chinese history.

State media outlets reported the arrest of Ding Ning and 20 of his employees late Sunday. State broadcaster CCTV aired purported confessions from two former employees at Ezubao, an Anhui Province outfit that rose from obscurity to become China's largest online financing platform in about 18 months.

Ezubao was the most spectacular player in a booming online investment industry that Chinese authorities have been struggling to regulate. Firms ranging from established Internet companies such as Alibaba to virtually unknown upstarts have flooded into the business, promising higher returns than those at state-run banks, which often offer interest rates below inflation.

Ezubao promised investors that borrowers would pay back loans at interest rates between 9 and 14.6 percent, but 95 percent of those borrowers were fictional entities created by Ezubao, a former company executive told investigators.

Behind the firm's rise was 34-year-old Ding Ning, an Anhui native who dropped out of school at 17 to work at his mother's hardware factory, where he first gained experience running online sales, according to media reports.

With no technical or financial training, Ding launched Ezubao in July 2014 and opened multiple marketing offices across China. The venture bought expensive ad spots that aired just before the widely viewed nightly CCTV newscast, the state broadcaster's flagship program. Ezubao appeared to gain Beijing's imprimatur when the gov.cn government website published an interview with Ding in July discussing his life as an entrepreneur. The interview has since been removed from the site.

State media took a far different tone Sunday as CCTV aired Ding's confession and footage of officials hauling away bags of cash from his home. The Xinhua news agency detailed Ding's extravagant lifestyle and the gifts he lavished on a business partner, Zhang Min, including a $20 million villa in Singapore and a $1.8 million pink diamond ring.

"The truth is that it's a fraud … it's a typical Ponzi scheme," Zhang, the associate, said in her aired confession.

Despite the vast sums cited in the case, Ezubao, which also went by Ezubo on its website, represented just a sliver of China's shadow banking industry estimated to be worth $1.5 trillion as of the end of June, according to Chinese banking regulators.

Fu Weigang, a researcher at the Shanghai Institute for Finance and Law, said difficulty obtaining financing in a state-dominated banking system has for decades driven Chinese citizens into underground borrowing and lending, which also gave rise to countless Ponzi schemes.

But Ezubao was able to take advantage of an influx of mom-and-pop investors in recent years using an Internet model, Fu said, effectively pushing small-scale scams to a countrywide level.

"What they were doing was nothing new in China," Fu said. "But how they were doing it online, and the scale, was unprecedented."

China company accused of fleecing investors of $7.6 billion 02/01/16 [Last modified: Monday, February 1, 2016 7:57pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Federal agencies demand records from SeaWorld theme park

    Tourism

    Associated Press

    ORLANDO — Two federal agencies are reportedly demanding financial records from SeaWorld.

    Killer whales Ikaika and Corky participate in behaviors commonly done in the wild during SeaWorld's Killer Whale educational presentation in this photo from Jan. 9. SeaWorld has been subpoenaed by two federal agencies for comments that executives and the company made in August 2014 about the impact from the "Blackfish" documentary. 
[Nelvin C. Cepeda/San Diego Union-Tribune/TNS]
  2. Legalized medical marijuana signed into law by Rick Scott

    State Roundup

    TALLAHASSEE — Gov. Rick Scott on Friday signed into law a broader medical marijuana system for the state, following through on a promise he made earlier this month.

    Gov. Rick Scott signed legislation on Friday that legalizes medical marijuana in Florida.
  3. Line of moms welcome Once Upon A Child to Carrollwood

    Business

    CARROLLWOOD — Strollers of all shapes and sizes are lined up in front of the store, and inside, there are racks of children's clothing in every color of the rainbow.

    At Once Upon A Child, you often as many baby strollers outside as you find baby furniture and accessories. It recently opened this location in Carrollwood. Photo by Danielle Hauser
  4. Pastries N Chaat brings North India cuisine to North Tampa

    Business

    TAMPA — Pastries N Chaat, a new restaurant offering Indian street food, opened this week near the University of South Florida.

    The menu at Pastries N Chaat includes a large variety of Biriyani, an entree owners say is beloved by millions. Photo courtesy of Pastries N Chaat.
  5. 'Garbage juice' seen as threat to drinking water in Florida Panhandle county

    Water

    To Waste Management, the nation's largest handler of garbage, the liquid that winds up at the bottom of a landfill is called "leachate," and it can safely be disposed of in a well that's 4,200 feet deep.

    Three samples that were displayed by Jackson County NAACP President Ronstance Pittman at a public meeting on Waste Management's deep well injection proposal. The sample on the left is full of leachate from the Jackson County landfill, the stuff that would be injected into the well. The sample on the right shows leachate after it's been treated at a wastewater treatment plant. The one in the middle is tap water.