Capital collecting scam case uncovered
By Ma Lie (China Daily)
Updated: 2006-02-14 06:13

XI'AN:, People are being warned about investment scams that promise large payouts after an illegal operation which collected about 140 million yuan (US$17.3 million) was uncovered.

Police in Xi'an, capital of Northwest China's Shaanxi Province, revealed at the weekend that they had cracked a capital gathering case that more than 270,000 people living in 18 provinces, municipalities and autonomous regions had given money to.

Officers said only 40 million yuan (US$5 million) was paid back to investors from the huge sum collected.

According to police, the ringleader was Hao Yongsheng, 36, who owns a private company in Xi'an.

Hao, of Taiyuan, Shanxi Province, was previously jailed for five years for larceny.

Hao and his partner Jiang Jinzheng, a resident of Zaoyang, Hubei Province, registered a company in November 2004 in Xi'an, with false ID cards, aliases and false reports of funds, according to police sources.

Over the next 12 months, the pair illegally attracted investors to company projects by pledging to give high repayments, said Hu Weitian, chief officer in charge of the investigation.

"We received a report in December from Shaanxi Agricultural Bank saying that a depositor, Hao Yongsheng, had two individual accounts in the bank, and that the accounts, with funds frequently coming in and out, received more than 140 million yuan (US$17.3 million) within a year," said Hu.

The bank suspected Hao was involved in fraud, said Hu, who launched an investigation.

After a four-week probe, police said Hao and four partners had illegally gathered more than 140 million yuan from people, but only 40 million yuan (US$5 million) was paid back.

Hao and the four other suspects have been arrested. Police have clawed back 30 million yuan (US$3.7 million) from the illegal funds.

Wei Shehua, a resident in Xi'an, was one of those taken in by the scam.

He invested 24,000 yuan (US$3,000) in the scheme over 12 months from December 2004.

"The operators told me that I could get back more than seven times the money I invested, but I have been repaid with only 11,000 yuan (US$1,356) in the past 12 months," Wei told China Daily yesterday.

(China Daily 02/14/2006 page3)