City procuratorate warns of potential investment fraud
Be careful of a new form of illegal fund-raising, said Pang Zheng, deputy procurator general of the Shanghai Pudong New Area People's Procuratorate.
On Friday, a report was issued on economic crime handled by the procuratorate between 2018 and 2022.
It said over 3,000 such cases have been handled during the past five years. With the country strengthening the regulation of the financial sector, especially peer-to-peer (P2P) platforms in recent years, the number of financial cases increased in 2018 and 2019 but declined during the following years.
Illegal fundraising is still at the top of the list, accounting for over 60 percent of all economic crimes.
Fake investment projects disguised with good concepts such as elderly care, rural revitalization and new-energy vehicles have become the focus of fraud, the procuratorate said.
On Friday, the Shanghai No. 2 Intermediate People's Court handled a related case. A man, called Zhong Decai, was sentenced to life in prison and deprivation of political rights over illegal fundraising, involving over 1.28 billion yuan (US$179 million) in total.
The court said that Zhong had many elderly-care service companies. Under the pretext of investing in elderly-care projects and providing related services, the man used high interest rates, return of principal and discount as bait, and raised funds illegally from over 4,000 people during 2012 and 2020.
Zhong Decai in the stand at Shanghai No. 2 Intermediate People's Court on Friday
Meanwhile, some registered private equity funds have become a conduit for illegal fundraising, with laxer regulation compared with mutual funds, the procuratorate said.
To raise more money, the offenders illegally promised interest and refused to check the credentials of investors, which means they absorbed money from the public, not high net-worth individuals.
"People should bear in mind that all investments carry some degree of risk," said Tang Yifei, vice director of the economic crimes-related cases department of the procuratorate.
He added that the minimum amount for a person to invest in a private equity fund must not be less than one million yuan, which is a high threshold for most people. So investors should be cautious when someone says they can chip in with others to jointly invest in a private equity project.
Due to the large number of victims, long duration of crime, large amount of money involved and other issues, it is difficult to recover the losses of each person.
"We hope such kinds of crimes can be nipped in the bud through the report and awareness," Tang said.
