China Hit By Financial Scam 'Epidemic'

Li Wenxing was starting a new life. In May, the young university graduate left his home in rural China on the offer of work with a software company in the city of Tianjin......
But the job was a scam and Mr Li was swept into the web of a gang running a pyramid scheme.

Two months later he was dead.

The tragedy, which is being investigated, sparked national outrage and has illuminated the growing problem of financial fraud and its devastating impact on communities in China.

"It's almost an epidemic, especially in rural areas," says Violet Ho, senior managing director at Kroll.
Pyramid schemes

Pyramid schemes are flourishing in parts of the country where education levels are low.

The schemes prey on the vulnerable, typically young people and the elderly, with the promise of employment or lucrative returns for direct sales of products like cosmetics or health supplements.

Victims are assured of great fortune if they recruit more investors into the operation.

"They give the illusion to naive people that they can get rich quickly without risk," says Ms Ho, who investigates financial systems and advises on China.

Peer-to-peer lending and virtual currencies have fuelled the spread of other investing scams, luring victims with little financial knowledge.