Only In China: A Pyramid Scheme Involving Actual Pyramids

It’s only appropriate that the country with the $40 trillion ponzi financial system and where a broke pig farming company paid its creditors in bacon, only to run out of pigs, has created a pyramid scheme that involves literal pyramids.

Authorities in China’s capital are investigating two companies selling “energy pyramid” products using such illegal practices as fake advertising and multilevel marketing, The Beijing News reported Monday.

According to the outlet, police in Beijing’s Fengtai District launched an investigation with the national-level State Administration for Industry and Commerce on Monday to look into the products’ manufacturer, Weihai Ruihong Energy Technology Co. Ltd., and distributor, Beijing Hongzheng Technology Co. Ltd.

The companies allegedly advertised their pyramid-shaped wares — priced between 5,000 and 100,000 yuan ($740 and $14,900) — as having “healing” and “energy-absorbing” properties, and like any other pyramid scheme, attempted to recruit salespeople into a multilevel marketing operation. The twist: the “pyramid” is far more useless than a Herbalife – another multi-level marketing scheme – shake, and so one has to work very hard to get more resellers, which effectively dooms the ponzi scheme which relies on quick propagation of motivation to sell.

In a statement Tuesday, Weihai Ruihong said it would terminate its relationship with Beijing Hongzheng, accusing the latter of false advertising.

While Beijing is known to generally encourage speculative bubbles, it is far less tolerant to ponzi schemes: last June, Chinese authorities in 11 cities named and shamed in a national blacklist for their high numbers of pyramid schemes have launched urgent campaigns to put a stop to them, according to a report.

The list of cities advised to take action against pyramid selling was issued last April by the State Administration for Market Regulation, which said it would monitor the cities’ performance for the rest of the year, news website reported.

The move came after several deaths related to pyramid selling in 2016 and 2017.

A pyramid scheme that recruits members using a promise of payment for persuading others into the scheme is illegal on the mainland and often turns into a Ponzi scheme – which generates returns for older investors by finding new investors – sometimes following violence and illegal detention.

“The rampant spread of pyramid schemes – with low-income migrant workers, the recently unemployed and recent graduates often falling victim to schemes promising quick riches – has coincided with China’s wealth gap and an imbalance in development between urban areas and more remote provinces.

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