Authorities in central China yesterday announced the arrests of 234 people allegedly involved in a scam to defraud people out of their savings with the false promise of high interest rates on deposits in obscure rural banks.
The $5.8 billion scandal is China¡¯s biggest bank fraud yet. The nation has started repaying the victims, in a bid to maintain social stability ahead of this year¡¯s twice-a-decade Communist Party congress, as per the Bloomberg report.
Police in Xuchang city of Henan province arrested 234 suspects tied to the scam and made ¡°significant progress¡± in recovering the stolen money, according to a statement yesterday. Police have reportedly said that a criminal gang led by suspect Lv Yi illegally controlled four rural lenders including Yuzhou Xinminsheng Village Bank, offering rates as high as 18% to attract funds that officials say amounted to 40 billion yuan ($5.8 billion).?
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Although village banks aren¡¯t allowed to seek deposits from outside their local area, the lenders involved in the scam marketed their deposits online via third-party platforms, making it a national problem.?
China has been trying for years to root out problems in its troubled rural banking system, a network of some 3,800 lenders which hold the lowest capital on hand against risky assets among peers. Beijing has raised 64.6 billion yuan in the first batch for a stability fund to bail out troubled financial institutions.
Local authorities said they are repaying more victims, on top of the 18 billion yuan doled out as of mid-August 2022. Investors with deposits of 400,000 yuan to 500,000 yuan will be repaid starting early Tuesday, the authorities said. Those who have lost more will be getting an initial sum of 500,000 yuan with the remainder reserved for now, the report mentioned.
Earlier this year, hundreds of protesters reportedly took to the streets in Henan after being denied access to their deposits and investments from the rural banks. The scam dealt the biggest hit to the confidence in China¡¯s $52 trillion banking system since 2019, when the government seized control of a lender in Inner Mongolia.?
All this comes amidst the Communist Party gearing up for its 20th congress later this year, where President Xi Jinping is expected to secure an unprecedented third term.
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