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BEIJING — Authorities in central China announced Monday the arrests of 234 people involved in a scam to siphon off their savings by falsely promising high interest rates on deposits at unknown rural banks.
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The scandal drew national attention after investors seeking answers about where their money had gone were prevented from reaching Henan’s provincial capital Zhengzhou when the health status displayed on their mandatory mobile phone apps for COVID-19. it was suddenly changed to red, preventing them from traveling.
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Multiple bank customers interviewed by the AP said they were questioned and threatened by police.
Another attempt in July was met by gangs of unidentified men in white shirts who attacked depositors while police stood by.
The Xuchang city government statement said alleged mastermind Lu Yiwei and his associates took control of four county-level banks and lured investors with promises of interest rates of up to 18 percent a year.
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“Currently, public security authorities have detained a large number of criminal suspects, among whom 234 have been arrested,” the statement said.
“Significant progress has been made in recovering stolen goods and damages. The investigation and work on the case is carried out thoroughly according to the law.
The statement said the scheme’s originators, who later “embezzled” the funds, negotiated the investments with other people who deposited hundreds of thousands of dollars, giving the scam the appearance of a Ponzi scheme.
There is no mention of suspected collusion between local authorities, the police and the suspects.
The scam unfolds as thousands of customers open accounts at six banks in Henan and neighboring Anhui province that offer relatively high interest rates. China’s sharp decline in economic growth and minimal returns on savings in state-owned banks have prompted many Chinese to invest in unconventional and often risky or even fraudulent financial instruments.
Customers of the Henan banks later found they could not make withdrawals after news reports said the head of the banks’ parent company was wanted for financial crimes. A parent company linked to the banks is being investigated by police.
Bank officials said they would return the deposits of some of the bank’s customers, but many are still waiting to know when they will be refunded.
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