Looks like we aren't the only ones getting sucked up in the vortex of a Ponzie scheme going bad.
A Chinese Bank Run?
Submitted by Tyler Durden on 06/01/2012 15:29 -0400
The balance sheet recession that seems to have correctly diagnosed the problem facing Japan (and now Europe and the US) - explicitly causing debt minimzation as opposed to profit maximization - seems to be taking hold. However, it appears this death-knell for credit-created growth is now being seen in China - as AlsoSprachAnalyst interprets "people are not borrowing, but selling assets to pay down debts, and/or holding cash". What is most worrisome is that while the focus of the world has been on European bank runs (for fear of bank failure and redenomination risk), 21st Century Business Herald now notes that these bank runs have spread to China's industrial and construction-heavy city of Wuyishan. Queues were seen on various branches of China Construction Bank, Agricultural Bank of China, and Industrial and Commercial Bank of China.
The reason which triggered the bank run was that there was a company that has just gone bust, with the founder and other executives ran away, brining probably RMB1 billion or more away with them. The company in question looks like a Ponzi scheme. It has set up an online shopping site which, on top of selling stuff, asks people to sign up and pay a certain among of money (e.g. RMB1,600), then the company will pay people back at a rate of RMB20 a day (a fee of 5% out of this RMB20 is deducted). It sounds like a pretty good deal for the members, as far as it is working. Based on the bank statement of the members obtained by 21st Century Business Herald, the company did pay back quite a fair amount, but, of course, the company has sucked up more than it has ever had a chance to pay back.
As the company went bust and the boss disappeared, the members of the website who have paid quite a lot of money in hope to be paid back even more became rather angry, and went to the office of this company in Fuzhou (which is actually not at all near Wuyishan) to protest and smash things. However, as a lot of members of the website came from Wuyishan, people are worried. On late 30 May, there was apparently some chatter that the government is dealing with the case, and will need to freeze personal bank accounts (presumably for investigations). As a result of this, people started queuing up at virtually all banks the next day. One local resident told the reporter that the city “has gone crazy”.
Now the boss is arrested, charged with taking deposits from the public illegally. But victims of the scheme are still counting, and the exact count of the victims of the scheme is not known. What is known is that because the website was so popular all over, the victims of this scheme will not be limited to one city of Wuyishan.
May 31, the edge of the Fuzhou West, Fauci Lake Garden north-floor six-story is a mess, the whole layer of the huge office space only a few grid, ceiling air-conditioning, including all items have been looted. about 300 square meters of space can be seen everywhere damaged ceiling and scraps of paper waste, and even the Office of the Chairman of the glass door was smashed.
"In the middle of the night on the 28th, happened here the mob looting took indoor items is a member of the full mall, an angry crowd smashed the decoration." Fauci Lake Garden security told this reporter.
This is where many members had placed 100% of fortune dream mall stronghold. This reporter saw a full-affected member notice pasted on its door bearing the words: you full members and the victims go to Fuzhou Economic Investigation Team focus, and discuss funeral.
"Full mall claimed more than 20 million members, covering 23 provinces and cities." Member surnamed Chen, told this reporter, "the causes of things heard the full mall owners Yao Jianqing and senior have escaped more than 10 billion Pao Lu. "
On the evening of May 31, the reporter learned from the Fuzhou police, Yao Jianqing was the same day was five brigade of the Fuzhou Public Security Bureau of Economic Investigation Detachment from the field and arrested and brought to the suspected charges of illegal deposits from the public, within a short time the police have registered the cheated amount of tens of millions million.
Involved in this case the number and amount, is still the legend diverse. Since the filing due May 29, made a report people are doing it, has not yet specific statistics on the amount involved and the victim number.
May 28 night in Fuzhou, looting, and has rapidly spread to northern Fujian Wuyishan City