The founder of a Chinese online peer-to-peer lender has been sentenced to life in prison on charges of defrauding investors of US$7.7 billion in one of China’s biggest financial scams.
Ezubo (e-租寶) was the biggest competitor in an informal finance industry that Chinese authorities allowed to flourish with little oversight over the past decade to support entrepreneurs who cannot get loans from state banks.
A series of lenders have collapsed as economic growth has slowed, leaving authorities struggling to defuse protests by depositors.
Photo: AP
Ezubo founder Ding Ning (丁寧) and his younger brother, Ding Dian (丁甸), on Tuesday were sentenced to life by the Beijing No. 1 Intermediate People’s Court for “fundraising fraud,” Xinhua news agency said.
Another 24 executives were sentenced to prison terms ranging from three to 15 years, it added.
Two companies affiliated with Ezubo were fined a total of 1.9 billion yuan (US$290 million), Xinhua said, adding that some defendants were also convicted of other offenses, including smuggling precious metals and illegal gun possession.
Regulators seized Ezubo in December 2015 on charges of taking deposits without a license. Xinhua said authorities have confiscated the company’s assets to repay depositors, but gave no indication of how much money was recovered.
Ding, 34, was a high-school dropout who worked at his mother’s hardware factory, where he gained experience running online sales, according to media reports.
With no technical or financial training, Ding launched Ezubo in July 2014 and opened marketing offices across China.
The company attracted deposits by promising returns of 9 to 14.6 percent, investigators said.
However, authorities say a former executive said that 95 percent of those borrowers were fictional entities created by Ezubo.
In a confession broadcast by state television in February last year, the executive called the company “a fraud... A typical Ponzi scheme.”
The court said that Ding and other defendants “inflicted huge losses on investors in many parts of China and disrupted the national financial management system,” Xinhua said.
Earlier, two businesswomen in southern China were sentenced to death in 2012 and 2013 in separate cases on charges of “illegal fundraising.” The penalty for the first was converted to a prison term following an outcry online that it was too severe.
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