Chinese authorities have urged investors to register their claims against a now shut peer-to-peer (P2P) lender allegedly behind the country’s biggest-ever Ponzi scheme, according to a statement, raising hopes of compensation.
The Chinese Ministry of Public Security on Saturday called on investors in the financial products of Ezubao (e租寶) — which allegedly bilked 900,000 people out of 50 billion yuan (US$7.6 billion) — to provide their personal information through a newly established online platform.
The ministry would collect the information until May 13, using it to assist in the investigation and as a “reference for return of funds,” according to the statement.
Police shut down the company in December last year and state media earlier this month publicized some of the 21 arrested executives involved with Ezubao and its parent firm, Yucheng Global Holding Group Co (鈺誠), saying their platform was a fraud.
The scandal has highlighted poor regulation in the world’s biggest P2P market, but also how Chinese investors fail to recognize financial risk.
China began regulating the country’s P2P market only two months ago. Last month, the China Banking Regulatory Commission said that 1,672 firms, or almost a third of the more than 4,639 total, were “problematic.”
The commission has banned firms from mixing their own money in the general pool of loan funds, guaranteeing yields or selling high-return trust and wealth management products.
It also imposed new rules requiring P2P firms to deposit investors’ money at banks, throwing a bone to institutions that had been losing business to their upstart rivals.
Claimants were invited to submit their information electronically given the large number of investors spread over a wide geographical area and involving a massive amount of data, the ministry said in the statement.
However, some investors voiced skepticism about the government’s motives, with one saying she feared authorities might use any information against her for participating in what the police statement called “illegal fundraising.”
“They called it illegal fundraising and if I register, I’m the one who was doing that,” said Wang Dehong, who lost 180,000 yuan.
Police said the government would “protect the legal rights of investors.”
The collapse of the company has already sparked protests, which the government typically fears out of worries over social unrest.
China has nearly 2,600 platforms described as P2P businesses, according to one industry estimate, with transactions valued at about US$150 billion last year.
Additional reporting by Bloomberg
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