Private Equity Scams Prevail in China

By Marc Castro

Feb 28, 2013 06:13 AM EST

The city of Tianjin in China was rocked with controversy as thousands of retail investors claimed they were tricked by a group that offered illegal wealth management products. This is an increasing problem with the rush of China into private equity development and this cost individuals nearly US$500 million.

The scammers are riding the quest of government drives to promote the private equity industry in the world's second largest economy. Many licenses were issued and there is little or no regulation to protect the consumers. The hapless victims of the scams are ordinary middle class investors, many losing their life savings in the process.

The main issue for the prevalence of these scammers is the lack of investment opportunities available to retail investors. The current tight controls on overseas investments as well as a sluggish stock market has made these individuals keen on pursuing wealth via investments fish in a barrel for these malefactors.

© 2024 VCPOST, All rights reserved. Do not reproduce without permission.

Join the Conversation

Real Time Analytics