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China reinforces crackdown on pyramid scheme

Updated: Dec 15,2016 7:43 AM     Xinhua

BEIJING -- The Ministry of Public Security (MPS) said on Dec 14 it is doing more to combat pyramid schemes in China.

Police investigated 2,826 pyramid scheme cases in 2016, 19.1 percent more than in 2015.

Pyramid schemes have a long history in China. From 2005 to 2015, 21,904 pyramid schemes were investigated and 990 million yuan ($140 million) confiscated.

Currently these schemes are expanding through the internet, especially social networks, including domestic chat apps, the MPS said. They spread more widely and faster, involving greater amounts of money and more victims.

In 2016, police resolved more than 30 cases, each involving more than 100 million yuan. Pyramid schemes have appeared in the guise of charity fund-raising, e-commerce and this year, 150 cases involving virtual currency.

A pyramid scheme, illegal in most countries, is a business model based on enrolling increasing numbers of participants instead of real sales or investment. In such schemes, an organization promises new members a share of the money taken from the people they recruit.

In a separate development, the MPS said it has also resolved an illegal fundraising case involving 200 million yuan, in Zhejiang province.

The Zhejiang IOT Technology Co. Ltd. set up in March this year, allegedly defrauded some 15,000 investors with its so-called “Yibi” (Yicoin) virtual currency.