Beijing police have arrested 14 key suspects in connection with
the biggest pyramid scheme the capital has ever uncovered, official
sources said on Sunday.
Police have also seized their private cars, real estate, and a
portion of the illicit gains, said the Beijing Municipal Public
Security Bureau.
The 14 were major players in a pyramid scheme involving the
Yilin Wood Company, which has swindled more than 1.6 billion yuan
(US$206 million) from about 20,000 people across the country since
April 2004, the bureau said.
Police have received reports from 4,500 people who were cheated
by investors promising high returns on the sales of woodland.
The company used a pyramid selling model, in which one
salesperson recruits other salespeople, who in turn recruit more,
according to the bureau.
Last December, the nine managers of the company were
arrested.
Even though pyramid selling is an accepted business model in
some countries, it was banned in China by a government regulation
in 1998. Authorities said such schemes have become a synonym for
cheating and hoodwinking in China.
People found guilty of organizing and running pyramid schemes
involving a large number of people face prison terms of five years
or more and can be ordered to repay up to five times the profits
generated by their illegal business operations, according to
Chinese law.
(Xinhua News Agency March 19, 2007)