The paper aims to report on the single largest peer-to-peer lending scandal in the history of China. The authors provide details on how the case was perpetrated. The authors also provide details as to how investors were fraudulently manipulated in the scam. Finally, the authors provide updates on recent regulation in China in the peer-to-peer lending industry.
This is a theoretical paper that provides a better understanding of both Ponzi schemes and fraudulent practices in the peer-to-peer industry.
While the Ponzi scheme has been around for many years, fraud perpetrators continue to find new ways to use the scheme to manipulate and take advantage of investors. The case of Ezubao provides important insight for both regulators, academics, investors and financial advisors.
Ezubao, a start-up in an industry with little to no regulation, provides a textbook example of common fraud symptoms (or red flags). The deception was enacted through Ezubao’s bold advertising scheme and falsified appearance of success and government support. This was enough to brilliantly deceive over 900,000 susceptible investors. While Ezubao was one of the first peer-to-peer lending scandals to be uncovered, it certainly will not be the last.
Albrecht, C., Morales, V., Baldwin, J.K. and Scott, S.D. (2017), "Ezubao: a Chinese Ponzi scheme with a twist", Journal of Financial Crime, Vol. 24 No. 2, pp. 256-259. https://doi.org/10.1108/JFC-04-2016-0026
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