China Arrests Ezubo Executives in $7.6 Billion P2P Fraud Case

  • Almost 95% of investment projects on Ezubo are fake: Xinhua
  • Draft regulations for P2P lenders introduced in December

Chinese authorities arrested 21 executives of Internet finance platform Ezubo for allegedly defrauding investors of more than 50 billion yuan ($7.6 billion) and possessing weapons illegally, the official Xinhua News Agency reported.

Almost 95 percent of investment projects listed on Ezubo -- which means easy-to-lease -- don’t exist, Xinhua reported, citing the website’s owner Ding Ning, who was among those arrested. The company attracted money from about 900,000 people by offering high interest rates and ran a ponzi scheme to pay off some investors between July 2014 and last December.

The arrests follow a clampdown by China’s banking regulator in December, when it issued draft rules to govern the 2,612 online peer-to-peer lenders that had helped fuel a stock rally which swiftly turned to bust last summer. More than 1,000 of the so-called P2P firms are “problematic,” the China Banking Regulatory Commission said at the time, as it pledged to “cleanse the market.”

China launched an investigation into Ezubo on Dec. 8 after finding signs of tight cash flow, and indications that executives had started to move funds and destroy evidence, Xinhua said.

Buried Evidence

Police used two excavators and dug for 20 hours to unearth 80 bags of evidence that Ezubo executives had buried six meters underground on the outskirts of Hefei, a city in the eastern province of Anhui, according to the report.

Rather than paying off investors, executives had squandered money on personal spending, advertisements and investments in nonperforming assets, the news agency said. Ding, the chairman of Yucheng Group, which ultimately controls Ezubo, gave 550 million yuan to Yucheng’s President Zhang Min on top of a 130 million-yuan villa in Singapore and a 12 million-yuan pink diamond ring, Xinhua said.

Agricultural Bank of China Ltd. last month ordered independent payment services to shut access to online lending sites, saying that links to P2P firms through its cards had exposed the lender to risks and damaged its reputation.

— With assistance by Jun Luo

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