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August 7, 2010

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Ponzi scheme involved 12m yuan, court hears

A MAN was brought before Jing'an District People's Court yesterday for running a Ponzi scheme, swindling 12 million yuan (US$1.77 million) from 11 victims, prosecutors said.

Xu Jihai, 27, started to raise money from friends three years ago by promising high returns, prosecutors said. He also had placed ads in newspapers to attract more customers in the name of an investment company, prosecutors told the court, which did not issue a verdict.

Xu claimed to have close relations with banks and that these connections would allow him to participate in high interest loans.

He was detained by officers on March 3 after he was unable to pay the promised return to a victim who called police, the court heard.

More than 8 million yuan has not been returned, according to prosecutors.

After swindling the money, Xu spent lavishly. He traveled to Japan and Australia and purchased expensive items, prosecutors said.

He also used the money to invest illegally and start businesses that failed, prosecutors added.

Xu, a former employee of a computer firm, offered a 2 to 5 percent monthly return to his investors. He used subsequent investors' money to pay the original investors. Xu was unable to continue the scheme after he spent all the money.


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