The accusations throw a shadow over China’s online finance industry, a lucrative area for many global leaders in the sector, but one that the authorities say has also drawn a growing number of cases of fraud and flameouts.
Chinese officials say that the online company, Ezubao, offered mostly fake investment products to its nearly one million investors, according to the state-run Xinhua news agency. The authorities arrested 21 people in Anhui, the eastern Chinese province where Ezubao is based, and closed some of the platform’s operations.
A new category of Chinese companies has emerged in recent years to do for customers what the country’s state-owned banks will not. Chinese customers widely use their smartphones to buy groceries or transfer money, and new types of finance companies are offering loans to small businesses, students and others that state banks traditionally ignore.
Cases of illegal fundraising related to peer-to-peer lending have grown quickly in the past two years, according to the local authorities, and officials pledged in December to tighten regulation of the industry. Because of the enormous sums involved and the large investor base, the collapse of a major online-financing platform could raise concerns over confidence in the security of such investments.
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