China fraudsters imprisoned for $1.5 billion scheme that cheated thousands

china yuan fraud

A Chinese court has sentenced 24 people to lengthy prison terms for bilking elderly citizens out of more than a billion dollars.

The group was convicted of cheating over 230,000 people, mostly senior citizens, out of 9.9 billion yuan ($1.5 billion) by offering fraudulent investments that promised returns as high as 47%, according to the official state media Xinhua.

The scam ran for a decade between 2002 and 2012, with branches operating across China, the report said.

The suspected ringleader was given a life sentence in the ruling on Monday by the court in the southern province of Guangdong. The other 23 convicted received jail terms ranging from 3 to 14 years.

Related: China cracks down on alleged $7.6 billion Ponzi scheme

The court also froze the suspects’ accounts, and seized assets including 127 vehicles and 43 villas. But much of the swindled money is unlikely to be recovered, as large sums were spent and other funds haven’t been traced, according to Xinhua.

This is the latest investment scandal to surface from China’s shadow-banking world — a dark, unregulated patch of the country’s financial system that offers murky investments with extremely high rates of return among other services.

There’s often no transparency about where exactly investor money is going — and the investment vehicles have vague names, such as “wealth management products.” In some cases, they’re sold through privately run exchanges or via online platforms.

Related: The founder of a Chinese metal exchange has vanished

Such services have proliferated as Chinese people look for places to invest their savings. For retail investors, there are few options to get more bang for their buck with domestic stock markets in turmoil and the property market struggling. Plus, these investments are at times marketed by large state-owned banks, which some investors see as an implicit guarantee.

Last month, Chinese authorities arrested more than 20 suspects who were accused of involvement in what was described as a massive Ponzi scheme that allegedly swindled hundreds of thousands people out of around $7.6 billion.

The scam was run under the name E-zubao, a peer-to-peer lending platform that promised investors attractive returns of as much as 15% when it launched a year and a half ago.

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