Online pyramid scheme involving 150,000 cracked

BEIJING -- Chinese police have cracked down on a pyramid scheme that had enrolled more than 150,000 participants through the Internet.

Sources with the Ministry of Public Security said on Sunday that after more than one year's investigation, the network of the scheme, in the disguise of electronic business, was destroyed in 17 provinces, regions and municipalities.

Police arrested the chief suspect of the scheme, a man surnamed Li in his mid-fifties, on May 19 by a teamwork in Beijing, Sichuan, Guangdong and Shandong.

Li started running pyramid sales since the 1990s. In 2005, he established a E-business company, Feifan International, and used it as a cover to sell faked goods at high prices to online customers, and offered commissions to those who purchased and resold the goods.

"The more buyers one participant developed, the more commissions he would get," said officer Sun Jun with the Public Security Bureau of Taian city in east Shandong province.

The officer said the scheme was very deceptive since many participants were confused by the tricks of chief suspect, who often organized promotion activities to prove his legitimacy and hired people to erase criticizing reports on the Internet.

According to the ministry, Li's scheme involved more than 1.4 billion yuan ($210 million).