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Ezubao: a Chinese Ponzi scheme with a twist

Chad Albrecht (Utah State University, Logan, Utah, USA)
Victor Morales (Universidad Autonoma de Ciudad Juarez, Juarez, Mexico)
Jack Kristian Baldwin (Huntsman School of Business, Utah State University, Logan, Utah, USA)
Steven Deron Scott (Huntsman School of Business, Utah State University, Logan, Utah, USA)

Journal of Financial Crime

ISSN: 1359-0790

Article publication date: 2 May 2017

962

Abstract

Purpose

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.

Design/methodology/approach

This is a theoretical paper that provides a better understanding of both Ponzi schemes and fraudulent practices in the peer-to-peer industry.

Findings

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.

Originality/value

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.

Keywords

Citation

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

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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