China announces 234 arrests in provincial banking scam

ZHENGZHOU: Chinese authorities have announced the arrests of 234 people involved in the financial scandal surrounding several rural banks in Henan province, local media reported on Monday.

According to the Xuchang city police, significant progress has been made in retrieving capital and recovering the losses, China Daily reported.

In early July 10, more than 1,000 depositors gathered outside the Zhengzhou branch of the country's central bank, the People's Bank of China, to launch their largest protest yet.

The incident comes in the light of the Henan branch of the Bank of China declaring that people's savings in their branch are 'investment products' and can't be withdrawn, according to the media report.

The investigation by the public security bureau of Xuchang has found that the criminal gang led by the suspect Lyu Yi illegally controlled four rural banks, including Yuzhou Xinminsheng Village Bank, and the gang is suspected of carrying out a series of serious crimes.

The police said in addition to the normal deposit interest, the criminal gang used part of the illegally obtained funds to attract more funds with an annual rate of return of 13 to 18 per cent as bait for an "interest subsidy" standard, as per China Daily.

The "interest subsidy" was exploited by the money brokers layer by layer, and was obtained by some large fund clients.

The investigation is proceeding in accordance with the law, the police said, as per China Daily.

From April 18, four rural banks in Henan suspended their online services, leaving customers unable to access their funds, which quickly aroused outrage.

The financial scandal has sparked further public outcry over the past few months after some customers complained their health codes had turned red for alleged non-epidemic-related reasons.

At the end of June five people, including four officials in Henan, had been punished for abusing their power by changing the color of the codes.

The previous investigation disclosed by police in Xuchang showed the group led by Lyu had allegedly been using several rural banks to engage in illegal activities and various crimes since 2011.