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. Last Updated: 07/27/2016

Thousands of Chinese Bilked in Futures Scam




BEIJING -- Desperate for money after being laid off by a state-owned seafood company, Zhang Li turned to a flamboyant Beijing-based investment guru she knew as Mai Ke, or Michael.


Michael's office walls were hung with photographs of him mixing with China's top leaders. And his futures house boasted links with the People's Liberation Army.


So Zhang, 42, decided that her life savings of 70,000 yuan ($8,433) would be safe in his hands, even though the 10 percent monthly interest payments seemed almost too good to be true.


Then Michael vanished.


And so did all Zhang's money, together with the deposits of as many as 8,000 Chinese investors, a sum conservatively estimated at around $150 million.


Enraged, many of them have turned on the government.


Fallout from the audacious scam has highlighted the political perils faced by Beijing as its economy slows, throwing millions out of work, some into the clutches of financial con men running get-rich-quick scams.


The scandal also helps explain why Chinese President Jiang Zemin is so keen to banish the military from the business world, where its vast commercial interests extend well beyond the reach of the law and market regulators.


"I've lost everything," sighed Zhang, a small woman who now regularly pickets outside the gates of Beijing's Zhongnanhai leadership compound.


Across China, tens of thousands of bilked investors complain of scams, though few are as daring as the one that ruined Zhang.


Xin Guo Da futures brokerage opened with great fanfare in March this year in leased office space in a gleaming marble-clad commercial building near the Temple of Heaven.


Michael, who is also known as Ni Wenliang and hails from Taiwan, had a theatrical allure. Props included bodyguards, a Mercedes limousine with a military license plate and -- most important of all -- pictures of him with top leaders.


Recruiters scattered leaflets at stock brokerages offering investors a travel allowance of 300 yuan to attend a one-month crash course by Michael on futures trading.


Would-be investors were taken to an imposing 500-seat auditorium inside Xin Guo Da. They were shown a videotape of Michael shaking hands with members of the Communist Party's powerful 22-member Politburo.


Michael boasted an uncanny ability to predict the trend of China's green bean, soybean and wheat futures prices.


Business was conducted from his headquarters in five trading rooms with licensed traders. Recruiters earned a 600 yuan commission for the first 50,000 yuan of investment -- the minimum -- they attracted and 200 yuan for every subsequent 50,000 yuan.


Urban Chinese earn on average 500 yuan a month.


Investors could play the markets themselves or pool their money and let Michael take charge, former employees said. Excited investors roped in their families, neighbors and close friends.


Toward the end, Michael offered monthly interest payments of up to 23 percent. Then, soon after a tax audit, the firm abruptly closed in August and Michael disappeared, the employees said. "It's a scam," said one of Michael's onetime lieutenants.