(MENAFN- NewsBytes)
China gets riddled with financial frauds and ponzi schemes
20 Sep 2017
Financial frauds and pyramid schemes have now reached epidemic levels in China.
These schemes thrive in parts of the country, where the education level is low.
The frauds target young and elderly people with promises of employment or attractive returns if they invest/engage in direct sales of their products.
They are promised rewards if they can include more people in this scheme.
Here's more.
What's it all about?
China
The promise of getting rich without any effort is a hard bait to avoid for those who can't see through the deceit.
Violet Ho, senior managing director at Kroll told BBC, "They give the illusion to naive people that they can get rich quickly without risk." With every new member that gets added to a pyramid scheme, the scam becomes bigger.
Why do people buy it?
Schemes
These schemes may seem rudimentary in nature compared to the highly sophisticated scams of the west, but they are enough to lure people with very little financial knowledge.
Ms. Ho said that there were victims who had borrowed money and even went on to extremes, such as selling their houses, just to bag the bigger return that they were promised.
What led to this?
Weibo
China's Facebook aka Weibo is filled with the chatter of pyramid scams. One user writes, "I've lost count of the people who've been trapped."
There are various factors that have led to the growth of these ponzi scams. Living costs in China have risen considerably over the years.
So, several people are looking for lucrative schemes with high returns to ease their financial burdens.
A lack of understanding
Beijing
Moreover, the local economies themselves, in the past, have advocated several questionable investment schemes, expecting bountiful returns.
This was done without proper understanding and under intense pressure to sustain and develop their respective areas.
Chinese authorities are now becoming more vigilant against such scams.
Beijing has recently issued a statement saying, "Pyramid schemes directly harm the market's economic order and social harmony and stability."
The ICO issue
ICO
The Chinese government is currently doing clean-up operations to eliminate pyramid selling. In this crackdown, more than 100 arrests were made last month.
In a major operation last year, authorities nabbed culprits, suspected of defrauding 900,000 investors.
This also sheds light on why China is eyeing ICOs with suspicion and has called for their ban, until a proper investigation is carried out.
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