I Lost My Savings in a Massive Chinese Investment Scam

Fanya Metal Exchange was once a celebrated success. The trading platform, founded in 2011 and based in Kunming in the southwestern Chinese province of Yunnan, allowed investors to fund the buying and selling of rare metals such as bismuth and indium. Within three years, it had become the world’s largest trading platform of its kind. But by July 2015, Fanya had frozen more than $6.5 billion in assets after a liquidity crisis, devastating many of its 220,000 investors. Its founder was arrested in December 2015, and the company is currently under investigation. Some industry analysts have deemed it a Ponzi scheme.

Fanya’s meteoric rise and subsequent collapse reflects systemic problems within China’s finance sector. China keeps interest rates very low to encourage investment in major real estate and construction projects, pushing the burgeoning middle class to look beyond banks to seek out better rates for their accumulating wealth. This has fueled frenzied speculation in real estate, the stock market, and on exchanges for commodities such as rare metals. The poorly regulated financial sector is also prone to scams. When a company collapses, jilted Chinese investors often blame government inaction or lack of regulation for their losses.

This is particularly true of Fanya investors, who claim that the company’s close relationship with government agencies and state media led them to believe that Fanya enjoyed state backing. Since July 2015, Fanya investors have protested in cities around China, demanding that authorities help them recover their savings. Kunming authorities are investigating Fanya, and on March 31 stated the company had used investor funds illegally. But many of those who lost money believe such a charge overlooks what they perceive as the government’s role. In response, hundreds of former Fanya investors took to Twitter in April to publicize their plight to the international community.

Foreign Policy contacted one of the investors through Twitter. Li Ming, who requested a pseudonym to protect herself from government reprisal, says she lost most of her family’s life savings when Fanya ceased operations. Below, she shares her story. While many of her statements reflect media reports, the account’s personal details have not been verified.

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It’s hard for me to remember that just a year and a half ago, I was happy. Now everything has changed.

In July 2014, I began investing in Fanya Metal Exchange. I was 29 years old, and my aging parents had entrusted me with their savings. Over the next three months, I deposited almost all of my family’s savings, around $175,000, into the account. I hoped to find an investment with moderate returns — I wasn’t looking to get rich quick. What attracted me was the flexibility and security of the investment; Fanya promised easy cash withdrawals at any time. I would act as a creditor, providing money for others who wished to buy rare metals. The company’s brochures claimed that major state-owned banks served as third-party custodians, meaning that transactions aren’t directly handled by the asset or investment manager but by a third party. I worked at a bank, so I was familiar with the relative security that this kind of arrangement can offer.

I had every reason to believe that Fanya was a reputable company and a safe investment. Indeed, the government seemed to officially promote it — for example, clerks at the major state-owned bank Industrial and Commercial Bank of China (ICBC) offered Fanya products to their customers. In November 2013, China’s National Bureau of Statistics (NBS) signed an official partnership agreement with Fanya. State news agency Xinhua featured Fanya in a December 2013 event. State broadcaster China Central Television’s Finance channel publicized Fanya nationally. And national financial institutions such as Xiamen International Trust and Hua Ao Trust did business with Fanya.

But in April 2015, I began to have doubts. A close friend of mine needed help. Her child fell terribly ill, and the treatment was expensive. I wanted to help her, but when I went to withdraw money, I discovered there was a withdrawal limit to my account — despite the promise that there would be no such limits — which only allowed me take out a few hundred dollars a day.

At that time, I chose to have faith in the government, and quietly waited for it to handle the issue. After all, it seemed to me that Fanya enjoyed official state support. That same month, NBS paid an official visit to Fanya’s headquarters in Kunming and made statements publicly affirming Fanya’s role in the Chinese economy. Some investors began organizing to try to get their voices heard. I believed, however, that a company with the government’s backing would be safe from trouble. So at first I didn’t participate in protests or other activities aimed at securing my rights.

But by July, I was unable to withdraw a single penny from my account.

This was an almost unbearable shock. This money included my parents’ savings, earned penny by penny over a lifetime. As with many ordinary people in China, my parents have always lived very frugally, and they trusted me to manage their savings. The rest of the money I invested in Fanya was what myself and my husband have earned over the past 9 years together. My parents are almost 60 years old, and they no longer have the ability to make money. In China, it’s very risky to not have any money. If my family were to face any sudden difficulty, we couldn’t rely on the government to save us.

I could not accept such a total loss. I also felt that the government had not upheld our rights as investors and as citizens, and that it had betrayed our trust. Many other former Fanya investors felt the same. We began to find each other and organize.

In October 2015, I participated in a planned protest in Beijing. More than 10,000 of us planned to converge on the capital to protest and to share our complaints with the central government. If the Kunming municipal government and the Yunnan provincial governments would not help us, surely Beijing would. I spent part of what remained of my money on train tickets, hotels, and banners.

But I am not stupid; I knew the risk of attempting a mass demonstration. I wasn’t afraid of arrest itself (and indeed, more than 2,000 participants were detained on their way to the protest). What I really feared was, with this country’s record on human rights, what would happen to my parents and other family members if the state got hold of them?

We had intended to petition the State Bureau for Letters and Visits, the office where Chinese citizens can present their complaints to the central government. But on Oct. 26, the day of our planned protest, the government cut off our petitioning. I was taken to a detention center in the outskirts of Beijing. There, Fanya investors from Shanxi province, also in town for the protest, told me that the police had come to their hotel late at night, knocking on doors and dragging away weary petitioners. Some were elderly, and some were even mothers with children in their arms. To this day, the government still will not hear our case. My keyboard is wet with tears right now even thinking of this.

The government found out the names and hotels where many protestors were staying, but not where our money had gone. That’s what hurt the most.

As a result of these troubles, I became so depressed that I was no longer fit for my position in the financial services industry, and I was dismissed. I developed an endocrine disorder, my period became irregular, and I suffered from insomnia. Treatment required expensive medication. We still must pay our mortage every month, which is close to $1,500. But now these expenses fall entirely on my partner’s shoulders. It’s so hard for me to forgive myself. I feel such deep pain that I’ve sometimes thought of suicide. But I can’t, because I still have my parents to care for.

These are all conditions that have become exceedingly common among Fanya investors. In Kunming, I heard of one man named Xu dying after after succumbing to depression. I also know of a young woman in Shanghai named Youyou. After the Fanya troubles began, she was overwhelmed with remorse and anxiety. Her husband told her that marrying her was the worst decision of his life. My husband and I, too, are awash in anxiety and pain.

But fellow victims of Fanya have comforted and encouraged me. In April, we mobilized to climbed the Great Firewall to spread our message on Twitter. I hope that through Twitter we can make China’s deteriorating human rights conditions known to the world. I also hope that abroad there are those who can help us.

I believe that Fanya is not a typical case of financial mismanagement, but rather that the government and state-owned banks are heavily implicated as well. Now, according to public announcements in late March and early April, authorities say Fanya engaged in illegal fundraising. But it seems that no one is going to hold the state-owned banks accountable for the role they played. And when we protest and try to fight for our own rights, the government would rather spend money — our taxpayer money — hunting us down than on finding out why we can’t get our money back. I am furious, and also disappointed with my own country.

Now I am targeted by the shui jun or “water army” – a horde of anonymous Internet trolls that can overwhelm email inboxes or social media accounts with an influx of messages. The messages at first sought to reassure investors that Fanya was only facing a small problem. Then they became more sinister, urging us to give up hope, and to shirk what I feel is my responsibility. I believe these messages come from government-backed web users.

I am so angry. I do not feel that domestic Chinese media has given sufficient attention to how Fanya investors were cheated. So all I can do is cross the Great Firewall to seek help from the international community.

I hope that through the foreign media, I can make the truth known and put pressure on the government. I hope that the foreign media can serve as an impartial party to provide oversight on the Chinese government’s handling of this situation.

The government has guns and an army. They can illegally detain anyone they want to. All I have is hope.

Translated by Bethany Allen-Ebrahimian.

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