Chinese police have arrested the founder of peer-to-peer online lender Ezubao and 20 others in a nationwide crackdown on what it said was a ponzi scheme that swindled 50 billion yuan ($7.6 billion from investors.
Police said more than 95 percent of the projects on the P2P financing platform were fake, Xinhua reported.
The assets of Ezubao and companies linked to it have been sealed and seized and the website of the lender has been shut down.
Ding Ning, the chairman of Yucheng Group, had founded Ezubao in July 2014, at a time when peer-to-peer financing emerged as a hot trend in China where small business's access to funds was a perennial problem.
The online platform was under the scanner for several weeks.
In December, police had sealed, frozen and seized the assets of Ezubao in Shanghai, Beijing, and provinces of Jiangsu and Guangdong as part of probes into the company, Shanghai Daily had reported.
The report said the company was investigated after it emerged that the platform was a ponzi scheme which took $11 billion from 4.9 million investors countrywide.
According to the report, the investigators were probing Ezubao for suspected illegal pooling of public deposits, highlighting the lack of regulation in the sector.
On December 28, the regulator China Banking Regulatory Commission issued draft rules for the sector which banned setting funds pool and raising funds of their own to lend out.
With the Chinese economy slowing down, the little regulated P2P platforms ran into problems, with as many as 1,000 operators deemed troubled companies.
China's booming 2P industry grew a staggering 28.6 percent in just one year, filling in the demand for easy credit from consumers and small businesses.
Its growth was accelerated by the rush of investors who looked for far better rate of returns than what banks could give.
The Wall Street Journal said in a report the number of P2P operators was 1,575 at the end of 2014, whereas there were only 50 such platforms three years before.