The biggest bank fraud in China cost people billions

China detained hundreds of individuals suspected of being engaged in the country’s largest bank fraud and began compensating further victims of the $5.8 billion scandal. 

People scammed of billions

Police in Henan province’s Xuchang city detained 234 defendants connected to the scam and, according to a statement released late Monday, made enormous progress in regaining the stolen funds. According to the police, a criminal organization controlled four rural lenders, including Yuzhou Xinminsheng Village Bank, by paying suspiciously high interest rates of up to 18% to entice customers to deposit 40 billion yuan or $5.8 billion in total.

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According to local authorities, additional victims are being repaid on top of the 18 billion yuan ($2.6 billion) distributed as of mid-August. Investors with deposits between 400,000 and 500,000 yuan ($57k to $72k) will get their money returned. 

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More substantial losers will receive an initial payment of 500,000 yuan, with the remaining funds being held back for the time being. In Henan earlier this year, hundreds of demonstrators flocked to the streets after rural banks refused to let them access their deposits and investments. 

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The fraud caused the sharpest drop in trust in China’s banking sector in years. Reportedly, the banks that have been involved have operated illegally for more than a decade. However, Chinese resentment against the cryptocurrency sector is still present, which could cause a lot of distress as citizens lost money in legal “traditional banking businesses,” but working with “fraudulent crypto businesses” is illegal in the country.  

The bottom line

Chinese financial system is in big trouble as the traditional banking system just robbed its citizens of billions of dollars and is against the developing cryptocurrency world, which allows seamless working without middlemen. However, for how long? People of China now have minimal trust in its traditional system and might be looking for a change.