Chinese Police Bust Major Pyramid Scheme in Guangxi

Chinese Police Bust Major Pyramid Scheme in Guangxi
Photo Credit: Kate Ter Haar @Flickr CC BY 2.0

What you need to know

Chinese netizens say MLM gangs have existed in Guangxi for years, but the government has not investigated them closely because they bring about economic growth.

Almost 200 people accused of involvement in a large multi-level marketing (MLM) scheme in Qinzhou, Guangxi Province, were arrested on Aug. 5 and charged with defrauding victims of more than RMB 760 million (US$1.14 billion).

The syndicate, known as 1.04, organized one-day trips for potential investors and deceived them into investing in the North Bay of Guangxi. Nearly 500 police officers worked on the case. Police estimate more than 3,000 people are involved in the scheme, mostly from Henan Province.

The group's bank account, which held more than RMB 10 million, has been frozen and police are now prosecuting 183 people in relation to the case.

MLM gangs operate pyramid schemes with members placed at different levels, based on their sales performance. After investing their own money in the scheme, members are told they will not be able to get their money out unless they persuade new members to join. Typically, the schemes' leaders are the only one who see any substantial profit.

Guangxi, in southern China, has seen a number of multi-level marketing operations in recent years.

Some Chinese netizens have commented on Weibo saying that Guangxi is “home to MLM schemes," with others observing that “Guangxi’s GDP growth and development rely on these groups.”

“MLM operations have existed in Guangxi for years, but the government has not investigated them closely because they bring about economic growth,” a netizen commented.

“Although the case has already been solved, it is too late,” another netizen said of the 1.04 scam. "Many people have already fallen victim to the fraud and lost their money.”

Pure Capital Operation, established in Nanning, Guangxi, in 2009 and busted in 2012, was a MLM promoting “spiritual education” among members. Another MLM gang in southern Qinzhou, Guangxi, had more than 500 members and ran for more than five years. It was stopped by police in January after scamming more than RMB 20 million.

First Editor: Olivia Yang
Second Editor: Edward White


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