China’s latest crackdown on pyramid schemes was prompted by three shocking deaths: one young man who was beaten, another who was found dead in a pond and a third left to die on a road.
Like elsewhere in the world, the scams have proliferated in China as fraudsters trick people into thinking they can become rich quickly.
Members are charged a joining fee and required to recruit new investors with promises of high returns.
Photo: AFP
However, the three deaths in July put a spotlight on more extreme tactics used by some organizations in China, where the schemes can raise large amounts of money.
Warning that pyramid schemes have become “more rampant,” four Chinese government agencies responded last month by launching a three-month crackdown that targets misleading online job adverts designed to lure young people.
Many of those who sign up online to promises of easy riches discover a harsh reality in which they are faced with intense demands, harassment or even physical abuse.
Pyramid schemes in China were criminalized in 2005, but are still booming, with authorities investigating more than 2,800 cases last year, a 20 percent increase from 2015.
An official from the government’s anti-pyramid scheme department said that there are “too many” scams and investigating them requires a lot of resources.
“Especially nowadays, many pyramid scheme organizations move their base to the countryside and develop members through the Internet, making it harder to monitor them and obtain evidence,” the official said.
In a surprising additional challenge, hundreds of members of a pyramid scheme in July held a demonstration in Beijing to protest against an investigation into their group, known as Shanxinhui (善心匯) or “philanthropic exchange.”
Scores have been detained.
Many pyramid schemes operate in cramped spaces where people eat together and sleep on the floor, said Li Xu (李旭), the founder of an organization that rescues people who become trapped.
The organizations that resort to violence do so to intimidate members into not reporting them to the police, he said, adding that the crackdowns have made it more difficult to recruit people.
“They are also afraid that newcomers will call the police. So they take away their mobile phone, control the newcomers by illegal detention and other violent means in order keep more people,” he said.
Li formed the China Anti-Pyramid Promotional Association after he was fooled into joining one himself more than a decade ago.
“Pyramid schemes in China target people who desire to change their life at a low cost,” he said.
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