The Rising Trend of Fraudulent Fundraising in China: Current Situation and Solutions

According to reports, reporters have learned from relevant departments of the China Banking and Insurance Regulatory Commission that in recent years, there have been frequent risks in private investment and financing, market retail, elderly care, and other fields. There have been some fundraising variants with gimmicks such as metaverse, virtual currency, and digital collectibles, and fundraising scams under the guise of technological innovation, green transformation, and rural revitalization are also constantly emerging. At the same time, many criminals illegally raise funds across provinces and regions through a combination of online and offline methods, significantly increasing the difficulty of risk detection. (Cailian Society)

China Banking and Insurance Regulatory Commission: Fundraising variants using metaverse, virtual currency, digital collectibles, etc. as gimmicks are on the rise

In recent years, China has observed increasing risks in private investment and financing, market retail, and elderly care, among other fields. Reports reveal that a number of fundraising variants with gimmicks are used to scam investors. Criminals also engage in fundraising scams by falsely claiming they involve technological innovation, green transformation, and rural revitalization. Illegally raising funds across provinces and regions via online and offline methods makes it more difficult to detect such scams.

Overview of Fundraising Scams in China

The China Banking and Insurance Regulatory Commission has been closely monitoring fundraising activities across the country. This has led to an awareness of frequent risks in the fields of private investment and financing, market retail, elderly care, and more. Various fundraising variants aim to scam investors, including the use of metaverse, virtual currency, and digital collectibles. But the growing trend involves fundraising scams disguised by claims of technological innovation, green transformation, and rural revitalization.
From cross-regional and inter-provincial investment schemes to online and offline scams, the fundraising sector in China poses a high degree of risk to investors. Fraud-related activities have evolved into more obscured methods to avoid detection, with criminal syndicates now creating specific fundraising scams almost customized for capturing certain types of investors.

The Inherent Risks in Private Investment and Financing

The rising cases of fraudulent fundraising in China are due to the loopholes in the country’s private investment and financing sector. Those taking advantage of the sector’s weaknesses are often smart and well-prepared. China’s private investment and financing sector is fragmented, with many different player types including P2P lending networks, online micro-lending platforms, and wealth management firms. These players have largely evaded government regulation, offering almost unbridled opportunities for fundraising scams.
In many cases, investors have no access to the real identity of those fundraising, leading to high levels of risk. The lack of transparent public information also creates opportunities for scammers to make false claims regarding economic benefits as well as leveraging loopholes to deceive investors.

The Growth of Offline Fraudulent Fundraising

In recent years, offline fraudulent fundraising has surged in China. Some incidents involve setting up a donations box in tourist attractions or selling a fraudulent coin as art. Scammers also work in coordination with offline organizations, such as schools and hospitals, to collect money by posing as charities. Other tactics include recruiting false ambassadors for charities or using fake fundraising platforms. Such scams often operate across provinces and regions, making them more difficult to track, especially when this is combined with online methods.

The Challenges Faced by Law Enforcement

The growth of fraudulent fundraising scams in China exacerbates the difficulty for law enforcement in detecting and prosecuting fraud cases. Fraudulent fundraising syndicates have been widely adopted by organized crime, and many criminals will use complicated methods and techniques to conceal their tracks. As a result, law enforcement agencies face significant technological and resource challenges to detect and prevent fraudulent fundraising.

Solutions to the Problem

The growing incidence of fraudulent fundraising in China is a matter of great concern. To combat this problem, policy change is needed to regulate fundraising activities and step up enforcement. This includes an increased focus on the development of online platforms to track and address fraudulent fundraising activities. Additionally, investors should focus on conducting due diligence prior to investing money, and should only invest in products with a real presence in the market.
Moreover, government regulation and enforcement should be tightened to prevent fraud with greater penalties for those found engaging in dishonest fundraising activities. The public also needs to be educated about the risks associated with investing in risky products that provide unrealistic returns.

Conclusion

Fraudulent fundraising in China is on the rise across a variety of sectors, including private investment and financing, market retail, elderly care and more. The lack of government regulation and the fragmentation of the private investment and financing sector have given rise to complex fraud cases that often target unsuspecting investors. Law enforcement agencies have had difficulty detecting and prosecuting these types of fraud cases, but government policy change and increased awareness around the risks associated with investing can help prevent these scams.

FAQs

1. How can investors protect themselves from fraudulent fundraising?

Investors must conduct due diligence and research on the investment products they want to invest in. They must also invest only in products that have a real presence in the market.

2. Why has the fundraising sector in China seen a rise in fraudulent activity?

The private investment and financing sector in China is fragmented, and many different types of players have largely evaded government regulation. This has provided unbridled opportunities for fraudulent activity.

3. What actions can the government take to address fraudulent fundraising in China?

Implementation of stricter government regulation and enforcement, stronger penalties for those found engaging in dishonest fundraising activities, and an increased focus on the development of online platforms to track and address fraudulent fundraising activities.