Chi­nese com­pany ac­cused of fleec­ing in­vestors of $7.6 b

The Pak Banker - - BUSINESS -

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 on 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 the span of 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%, but 95% 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 govern­ment web­site pub­lished an in­ter­view with Ding in July dis­cussing his life as an en­tre­pre­neur. The in­ter­view has since been re­moved from the site.

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