Chinese Investors of eZubao Face $7.6 Billion Worth Losses
An online lender eZubao, last year was making big impression on Chinese people offering big yields on investments ranging between 9 percent and 14.6 percent. The attractive returns helped the company gain customers in thousands every week.
Chen Xue, 33, who invested in this company, said "I saw eZubao's advertisements on [state-run] CCTV at prime time, so I thought it was a big and competitive company." Being highly impressed with the start-up she invested equivalent of almost $31,000 in the financial products offered by eZubao.
At the beginning, returns came regularly but in December disaster struck as eZubao abruptly stopped giving returns and shuttered its doors only eighteen months after running its business.
Panicked customers started to protest and Chinese police investigated the matter. This week, news surfaced that the business was nothing but a ponzi scheme. Chinese authorities broadcasted interviews with detained founder and CEO of eZubao's confessing about it. However, some feel that the confession perhaps may be done under duress.
The New China News Agency which is run by the state said the company cheated 900,000 clients of a total of equivalent to $7.6 billion. It is probably the biggest financial fraud ever in the history of China.
Shadow banking activities in China has grown in the last decade, with eZubao like financial firms performing functions like banks, only operating with lesser supervision.