Master Degree Open Shell Companies, "Cryptocurrency" Scammed Hundreds of Millions
2016年05月14日 08:17 14-MAY-2016 08:17来源：澎湃新闻 作者：邢丙银 Source: Pengpai News Author: Xing Bing
In May 2015, Zhaoqing City, Dinghu Branch, Economic Investigation Unit (EIU from now on), in Guangdong province received report from citizen Xie, who claimed that he was fooled into believe a Ms. Liang and purchased several Wantong Miracle (WM from now on) Suites for 26000 RMB, received the WM card, and was supposed to receive daily profit of 32 USD, but so far received nothing, and there's no sign of his original investment.
With economic investigation unit of three cities: Guangzhou, Shenzhen, and Zhaoqing cooperating, they revealed a huge illegal securities crime, that never was approved or licensed by authorities, and uses buzzwords such as protoshare investment product, e-commerce, and so on, with promises of huge profits.
Recently, Shenzhen EIU told Penpai News that this scam has victims in 28 provinces, 147 jurisdictions, and over 5800 victims, with amount of scam in the hundreds of millions of RMB. Investigation is ongoing.
Belief in WM Investment Profit, Ensnared in Trap
Ms. Chen of Changsha, Hunan province, was an investment in WM. In September 2013, a friend Chen (something) Fang told her that this Wantong (WT from now on) company released a series of WM products, promised huge profits if invested. Asked her to look into it.
Later, Ms. Chen searched the boss of Wantong, a Mr. Xu online. "Xu, online, is an angel investor, CEO of an investment bank, helped 7 Chinese companies get listed in foreign exchanges."
Ms. Chen believed all these to be true, and joined a WM related QQ Chat group, and learned of a recruiting meeting held by Wantong in Shenzhen coming in November 2013. Unable to resist, she went to Shenzhen to attend the meeting.
Based on memory, there were hundreds of people there. Wantong's executive direct, Mr. Zhou, promised the sun and the moon, described a bright future, and answered all of the questions from the attendants.
"If I invest 13000, I can profit 100 per day, that's very high profit." Not long after the meet, Ms. Chen bought in with 39000 RMB and bought three of the WM suite called "WCM705", at $1999 USD each.
Ms. Chen explained that WM suite has 5 amounts: $399, $799, $999, $1599, and $1999. Daily profit is dependent on the amount invested. For the $1999 suite, daily share is 16 E-points, worth 16 USD.
After the purchase of these suites, Ms. Chen registered in WM website, and can view her account and accumulated e-points, and even cash out at the beginning, but soon, cashing out became a problem.
"First it was delays, then later all cashing out was stopped. By April 2014, the entire website is gone." Ms. Chen asked her friend's upline, a Mr. Wang (something) Po, but he had no explanation.
In May 2015, Ms. Chen hard that Mr. Xu has established a new company in Shenzhen called WanYiTong (WYT from now on), and will do a promo event at a 5-star hotel. She went to check it out.
"He talked with the attendants about how to operate the company, how to recover the previous investment losses." Ms. Chen said, later, Mr. Xu announced via WeChat group that all original WM members can get a headstart in the WYT company by wiring 1% of the previously lost amount to WYT, become new WYT member, and converted the original e-Points into "AiBi" (LoveCoins).
Why was she willing to believe in LoveCoins? Ms. Chen said, part of it is hoping to recover her losses, and part of it is Mr. Xu expressed clearly that when the new company IPO, the LoveCoins can be converted into company protoshares. Thus, she wired the company another $390 RMB, and got back a bunch of virtual currency "LoveCoins".
One excuse after another, delay investors from cashing out
Police investigator explained that WM was launched in May 2013 by a Mr. Xu, so-called some investment bank holding group President, Mr. Liu CEO, Executive Director Mr. Xu something Zhong, and "financial scholar" Mr. Sun.
Mr. Xu is from Danyang, in Jiangsu province, and born in 1972. In 1992-1996 he studied at a university in Beijing, and in 1999-2001 got a masters at USC. Later he worked at investment banking industry, and went into WT in 2012.
WM started expansion centered on Beijing, claiming to be using Internet cloud services, cloud computing, and work retail discount system to provide clients with "capital appreciation". WM promised that once members purchases the various system suites, registered as WT Card member, then every day they will be able to profit share, up to 100 times. The profit share comes in two forms: the 16 E-points share can be cashed out, while 16 points of wallet shares can be used for online purchases.
Investigator claimed that in June 2013, a huge number of purchases of the various suites got capital flowing into the Beijing company operated by Xu, et al, and its foreign accounts, and the promised profit share started to accumulate rapidly, and the cash out requests rose quickly as well. By the end of the year, Xu, et all, trying to prevent the cash drain, started implementing cash out limits, increase the cash out delay, and basically limit and delay any sort of member withdrawal.
In July 2014, Xu, using the excuse that he had to integrate system with a new financial group, stopped withdrawals altogether. In October same year, Xu further claimed that he need to take care of business abroad and there were a lot of losses by members, and continued to prevent withdrawals.
"The truth is Xu is being investigated by Chinese Public Security. In August 2014, without returning any of the investor's capital, he stopped selling the WM products, and closed the website." Investigator said.
Established a dozen empty shell companies, continue to scam public into investing
After Wantong (WT) died, Xu used the Wantong Miracle (WM) platform and people to restart the scheme under a different name, continue to sell illegal securities.
This case has two other character that must be mentioned... Xu's father Xu (unknown) Jun, and Xu's cousin, Tang (unknown) Xiang
Investigator explained, in May 2015, Xu organized Xu (Sr.) and Tang to established WanYiTong (WYT from now on), Kingdom Financial Holding Investment, HundredNet Tech, and a dozen other companies. WYT is supposedly owned by Tang, while Kingdom Financial is supposedly held by Xu Sr., and Xu was supposedly their consultant. In reality Xu controlled all of these entities.
After establishing these companies, Xu released news in the original WM platform, and the QQ / WeChat groups that he has a way to help make up the losses suffered by all the WM investors. All WT Card members just pay 1% of the amount they lost, and they will become Kingdom's members, and the originally loss will be converted into "AiBi" (LoveCoin). LoveCoin cannot be cashed out, but can be used to purchase the company's protoshares.
Xu confessed that he used three separate phones to register 3 separate WeChat accounts, to create multiple WeChat groups, in order to "appease"the crowd that suffered losses under WM.
In reality, Kingdom, HundredNet, and the dozen companies are all empty shells. WYT and HundredNet registered claiming they have 100 million RMB in capital in shares, but it actually had no capital at all. Investigator said, these companies are merely a guise Xu used to cheat all the investors. Company has no funds other than those deposited by investors.
"They used Internet, Weibo, WeChat, news conference, and other methods to claim that Kingdom will soon go IPO (issue its own shares, get listed in stock exchanges), in order to push the dozen or so subsidiaries to go IPO in the next 3-24 months, thus defrauding the public into purchases the "protoshares" of these companies, and thus, selling illegal securities." Investigators explained.
Primary Suspect Used Various Fake Titles to Deceive Investors
In the two or so years, Xu, et all managed to illegally solicit investment from over 5800 people in 28 different provinces. Why were so many investors scammed?
"Xu is very good in presenting himself, and promoting himself, as to trick the masses" Investigator explained. On the WT website, Xu claimed to be "Director, China Overseas Development Center", "Deputy Secretary, World Federation of Chinese Entrepreneurs", and a litany of long-winded titles. In fact, all these titles are bogus.
Police investigator said, whenever Xu conducts an investment promo, he chose to do it at a 5-star hotel. Their office was in a prime commercial section of Shenzhen, in a prime office building. Which gave the investors a false impression of prestige to further deceive them.
According to Tang (Xu's cousin), once WT closed, Kingdom tried to convert the old WT members over using the E-Coin activation ruse, while also used the HundredNet and online forums to promote and entice others to join, with incentive to existing members to bring in new members as downlines.
"I introduced two sisters to invest in WM, and they recruited additional friends and family to invest." Ms. Chen said. There is a $304 USD commission for introducing someone who buy the $1999 suite, so there were a lot of people who are willing to introduce new investors into the network.
Investigator explained further, that the Kingdom company also created "Kingdom Mayors" in 65 cities around the country, such as "Kingdom Guangzhou Mayor", "Kingdom Chengdu Mayor" and so on who are responsible to control local members, such as helping old investors who don't know the Internet to register online, to wire money to WYT's account, to help others "activate" the LoveCoins. Obviously such "mayors" are appropriately compensated.
Police believe that Xu, et al, used a zero-fund WYT company, "promised fixed profit share, using the claim that they are compensating members of Wantong Card their net losses, having no qualifications or capital to be issuing stocks or securities, using WeChat, Websites, and soon, promised to the public they will be compensated by virtual shares (protoshares) and virtual coins (LoveCoin). This operation is suspected of illegally soliciting deposit from the public (selling illegal securities).
With all these details, it's IMPOSSIBLE to imagine this can be anyone other than Phil Ming Xu of WCM777. The only question is whether he's in custody in China or not, and how will Chinese justice deal with him.