Investors lured by tempting returns
Limited investment options and misleading advertisements prompted thousands of residents in Liaoning province to pour their savings into the get-rich-quick scheme offered by Yilishen Group - to raise ants for an aphrodisiac potion - despite doubts and medical warnings.
Some investors thought the scheme might be an illegal fund-raising scam, but the high returns and a lack of investment alternatives made them willing to take the risk and put money into it.
'The returns it promised were much higher than what you gained from bank savings and even the stock market,' one investor, Cao Tao , said. The retrenched worker, who is in his 30s, said he had poured about 20,000 yuan into the scheme since 2003 and received his dividend on time until last month.
The Food and Drug Administration in the United States warned consumers in 2004 not to buy or consume Yilishen, a product sold as a dietary supplement but which has been found to contain prescription-strength sildenafil, an active drug ingredient in Viagra.
A netizen under the name of Intern Accountant, who claimed to be a worker with the Yilishen Group, confirmed the product's effect had nothing to do with ants.
But the US warning failed to reach the mainland media. Only a few mainland media linked the scheme with fund-raising activities.
Moreover, the company was among the first few to be offered a direct sale permit by the Ministry of Commerce last year. Its president, Wang Fengyou , has also been a delegate of the people's political consultative conference in Shenyang since 2002.
'The company has been running for about eight years and has been given many honours by the government. How could it have any problem?' an investor said.
The investor, who also believed the scheme was a fund-raising scam, suspected the company started to have financial troubles this year because it failed to attract new investors and some old investors had pulled out their money to invest in the mainland's bullish stock market.
But a source with official connections said the company was hit by a nationwide crackdown on underground fund-raising activities after the Communist Party's 17th National Congress as the authorities tried to control cash flowing into the overheated stock and property markets.
'Quite a few people involved in illegal fund-raising activities have been caught since the end of last month,' the source said.
A netizen under the name of Qianshan Muyu Shi, who identified himself as a civil servant in Liaoning, said the government had investigated the company before but did not close it down because of a lack of evidence and fears the crackdown would stir up investor anger against authorities.
The mainland has suffered a rash of get-rich-quick schemes in recent years
The return investors were told they would get back each year if they joined the ant-raising scheme: 30%