Enormous Chinese Ponzi Scheme!

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A criminal investigation by Chinese officials has found that the online company, Ezubao, once a dynamo of the financial industry, offered mostly fake investment products to its nearly one million investors. This has highlighted the urgent need for tougher supervision of online financing system in the world’s second largest economy.

Questions:
1. What interest rate was Ezubao offering on most of its “fake” investments? Discuss this in terms of red flags of fraud.
2. The platform for Ezubao was set up by the Yucheng Group in July 2014. What do we now know about Yucheng’s chairman, Ding Ning, and his brother, Ding Dian?
3. What did the company do to hide evidence of the fraud?
4. Explain the importance of peer-to-peer lending in the Chinese economy.

Source:
Gough, N. (2016). Online Lender Ezubao Took $7.6 Billion in Ponzi Scheme, China Says. The New York Times, Feb. 1 (Retrievable at http://www.nytimes.com/2016/02/02/business/dealbook/ezubao-china-fraud.html)