Beijing has cracked its biggest-ever pyramid scheme, totaling
over 1.6 billion yuan (US$206 million) in illegal funds, according
to the Beijing Municipal Public Security Bureau.
The Yilin Wood Company swindled more than 20,000 people
nationwide, including 17,000 in Beijing, since April 2004, said Fu
Zhenghua, deputy director of the bureau.
Police evidence shows how the company cheated investors through
lucrative offers of high returns on sales of woodland. They used a
pyramid selling model, through which one salesperson recruits more
salespeople who turn recruit more, according to the bureau.
Even though pyramid selling is legal in some countries, it was
banned in China through a cabinet regulation in 1998. Chinese
authorities view such schemes as avenues for cheating and
hoodwinking unsuspecting citizens.
The Beijing police have arrested 18 people and seized or frozen
part of the company's assets and illicit gains, said the bureau.
The company's Beijing office was closed down on Thursday.
Fu added that police are hunting other high-ranking members of
the selling scheme around the country and are trying to quickly
recover investors' losses.
Chinese law stipulates that organizers of large-scale pyramid
scheme face prison terms of five years or more and fines of up to
five times the profits generated by their illicit activities.
(Xinhua News Agency February 12, 2007)