Thousands of small investors have reportedly lost their hard-earned money in China after hundreds of online peer-to-peer lending sites that were reportedly promoted by the government crashed last week.
Lending platforms such as Tourongjia.com promised double-digit returns to its investors, which made them attractive options for a lot of people who wanted to earn some profit.
In P2P lending, investors hand their money to the platform which then lends it to others for profit. However, most investors failed to receive the promised earnings from the interests as many loans were reportedly left unpaid.
While the industry flourished with little oversight from the Chinese government in the past, the recent crackdown from Beijing has reportedly prompted a number of platforms to close.
The sudden shutting down of the platforms sparked protests from the investors who have claimed that the government initially promoted the lending firms.
On Monday, throngs of people arrived outside the office of the financial regulators in Beijing to stage a protest but was immediately shut down by police.
In an interview with CNN, a construction project manager in Beijing revealed he lost over 275,000 yuan (more than $40,000) after Tourongjia, the site he invested his money on, suddenly shut down last month.
The figure, he said, included his parents’ savings, money borrowed from friends, and funds he was saving for an apartment he was planning to purchase for him and his pregnant wife.
“The first reaction is disbelief. I didn’t believe the platform had collapsed … But in the end, I had to accept the truth,” said the 28-year-old man whose name was withheld.
He said he thought his investment was protected since Tourongjia appeared to have government backing.
“In China, the law only protects a small group of people — not us, the masses,” he was quoted as saying.
Tourongjia.com is currently under police investigation and now has a government notice posted on its site saying the chairman is missing and 13 suspects have been detained. The notice also urged investors to immediately report their losses to the authorities.
Industry insiders have noted that the Chinese government began to clamp down on the platforms by finally enforcing tighter regulations after they became “a magnet for the misrepresentation and criminality.”
Over 200 platforms have been shut down since July, according to Wangdaizhijia, a firm that monitors the P2P lending sector.
Since the likelihood of the victims getting compensation for the lost investment remains unknown, many of them have been trying to get answers from national authorities.
“We need to fight for our rights,” said a 36-year-old healthcare salesman who reportedly lost 1.4 million yuan (more than $205,000) with Tourongjia. “My life is ruined. Now, I’m like a financial refugee.”