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Possible scam nets 135m yuan
By Weng Lingling and Dong Hui |
March 12, 2009, Thursday
|
Print Edition
Print Edition
POLICE in Shanghai are investigating reports that a local firm may have swindled more than 700 Zhejiang Province investors out of 135 million yuan (US$20 million).
The deal involved promises of hefty investment returns that turned out to be too good to be true.
It was not clear yesterday whether people lost their savings to bad financial planning, a Ponzi-type scheme in which early investors receive initial returns from new investors before the perpetrators leave town, or some other problems.
The victims told reporters their troubles began when Shanghai Womeng Light Engineering Co Ltd sent its general manger, Fang Chaodong, to Zhejiang's Taishun City in early 2007 and persuaded residents to invest in the company.
Fang promised monthly interest payments of 4 percent, one of the victims, Xu Chaodong, said in an interview with the Shanghai Evening Post. Fang said the money would be used to cooperate with enterprises listed on China's stock markets, according to Xu.
More than 700 Taishun residents piled in with their cash, police said. Xu, a teacher in the city, transferred 250,000 yuan to the company's account last year, while another resident, Cai Chaoku, invested 1 million yuan.
"Interest was paid at the beginning of 2007 as promised," Cai said. Xu received 37,500 yuan in returns.
"But the interest payments were suspended last August," Cai said. "We smelled something wrong and tried to get our money back, but the company refused."
In January and February, hundreds of angry investors came to Shanghai in hopes of recovering their loss. Many went to the company's offices on Waiqingsong Road in Qingpu Distric, trying to confront Fang and company President Huang Baogui but the building was empty. They found only a security guard at the site.
"It's obvious that all the supposed principals and employees had run away along with all the money," Cai said.
Cai added that the victims have provided money orders and receipts to Qingpu District police.
The case is now under investigation by the Shanghai economic crime team.
The deal involved promises of hefty investment returns that turned out to be too good to be true.
It was not clear yesterday whether people lost their savings to bad financial planning, a Ponzi-type scheme in which early investors receive initial returns from new investors before the perpetrators leave town, or some other problems.
The victims told reporters their troubles began when Shanghai Womeng Light Engineering Co Ltd sent its general manger, Fang Chaodong, to Zhejiang's Taishun City in early 2007 and persuaded residents to invest in the company.
Fang promised monthly interest payments of 4 percent, one of the victims, Xu Chaodong, said in an interview with the Shanghai Evening Post. Fang said the money would be used to cooperate with enterprises listed on China's stock markets, according to Xu.
More than 700 Taishun residents piled in with their cash, police said. Xu, a teacher in the city, transferred 250,000 yuan to the company's account last year, while another resident, Cai Chaoku, invested 1 million yuan.
"Interest was paid at the beginning of 2007 as promised," Cai said. Xu received 37,500 yuan in returns.
"But the interest payments were suspended last August," Cai said. "We smelled something wrong and tried to get our money back, but the company refused."
In January and February, hundreds of angry investors came to Shanghai in hopes of recovering their loss. Many went to the company's offices on Waiqingsong Road in Qingpu Distric, trying to confront Fang and company President Huang Baogui but the building was empty. They found only a security guard at the site.
"It's obvious that all the supposed principals and employees had run away along with all the money," Cai said.
Cai added that the victims have provided money orders and receipts to Qingpu District police.
The case is now under investigation by the Shanghai economic crime team.
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