Friday, February 5, 2016

Face-to-face with China's Madoff

Surely we still remember Bernie Madoff, America's fraudster who operated a Ponzi scheme that is considered the largest financial fraud in US history? 

China has its own Madoff as well and I have just met two of its key executives!

First read the following excerpt which I took from one of Bloomberg's recent reports:

"Chinese authorities have arrested 21 suspects linked to Ezubo and its parent company, Yucheng International Holdings Group, on charges of illegally collecting funds, having allegedly conned more than 50 billion RMB ($7.6 billion) from investors, according to the state news agency Xinhua.

"According to Xinhua, Ezubo attracted investors with promises of annual interest payments of 9-14.6 percent in return for funding leasing projects, but instead used the money paid in by new investors to pay off earlier ones, in what Xinhua described as a classic Ponzi scheme.

"Yong Lei, once the director of Ezubo's risk control department and now detained, was quoted by Xinhua as saying that "95 percent of Ezubo's investment projects were fake."
The company's executives also spent large sums on personal luxuries and high-risk junk securities, Xinhua reported.

"Ding Ning, 34, president of Yucheng and the founder of Ezubo, reportedly used investors' money to buy lavish gifts for Zhang Min, the company's president, including a residential property in Singapore worth 130 million RMB ($19.8 million) and a pink diamond ring worth 12 million RMB ($1.8 million).

"In addition, Xinhua said Ding paid huge salaries to the company's employees - the company paid 800 million RMB ($121.6 million) to employees in November 2015 alone - and insisted all secretarial staff wear designer outfits and expensive jewelry to burnish the company's image of profitability.

"But tightening cash flow and unusual transactions by Ezubo triggered an investigation by Chinese authorities in December, Xinhua reported. The investigation included the use of two excavators to recover more than 80 bags full of paper accounts that had been buried six meters underground by the Ezubo's executives."

Now my experience with these two high-ranking Yucheng executives:

Two months ago a good friend asked if I would like to discuss business opportunities with one of the wealthiest investment groups from China. Why not?

He duly turned up with four ladies one day. Two of them gave me their cards, which are as above. The other two were content to stay in the background. (I later understood that they were the bodyguards to the COO!)

Sun and Helen are beauties in their own right. Helen is the younger of the two and she is the "boss". Sun speaks English, but not Helen.

Really not much was exchanged; I could see that they were not very interested or curious in things. Seeing that I was basically dealing with dumb blondes, I was happy to show them the door after an hour or so. 

I now see that they are not dumb at all; maybe I was not the right target for them, that's all.

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