I've spent half a century writing for radio and print (mostly print). I hope to still be tapping the keys as I take my last breath.
Chinese capitalism can be a bit rough and tumble, aided and abetted by corrupt officials. It is the sort of breeding ground in which fly-by-night operators flourish. But, state-controlled media doesn’t like to publicize swindles as it gives the impression that doing business in China might be a bit of a dodgy proposition. Which it is.
Investors are assured the government oversees its version of capitalism to make sure everything is squeaky clean. However, writing in The Asia Times, Kent Ewing says “There is no way of knowing how many scams go down daily in China . . . But the number is no doubt staggering, and some scams are just too big to be ignored.”
Pyramid Schemes in China
The government of Xi Jinping has vowed to crack down on swindles but they continue apace.
In September 2017, the BBC reported on the “ . . . growing problem of financial fraud and its devastating impact on communities in China.” Pyramid schemes are fleecing the largely uneducated rural populations with promises of riches from direct sales of such things as cosmetics or health supplements.
Of course, investors are told they’ll make even more money if they recruit other players into the action. These are classic pyramid operations that collapse when they can’t find enough new investors to pay off the early adopters. Even the prospect of execution if caught doesn’t seem to work as much of a deterrent to the con artists.
One such monster fiddle was ant farming.
The Care and Feeding of Ants
Wang Fengyou created the Yilishen Tianxi Group in 1999 and functioned as its Chairman and Chief Executive Officer. The company was going to make health care products and its raw material was going to come from ground up ant carcasses―of course it was.
Wang Fengyou and his managers persuaded illiterate farmers and retirees to invest their savings in his ant-breeding program. Most of them were fooled into believing the plan was legitimate because it had government backing.
For a trifling investment of 10,000 yuan ($1,600) the lucky rubes were guaranteed a return of 30 percent a year. All they had to do was accept delivery of a box of ants and feed and water the insects. The little creatures were to be put on a diet of egg yolk, sugar water, and cake (whether this was to be Victoria sponge, angel food, or some other variety was not specified).
After 90 days (accounts vary as to the timing) a Yilishen worker would collect the box containing the now-dead ants, they having outlived their natural life expectancy, or, perhaps fruit cake did them in if they had been fed that.
The ant farmers were told that under no circumstances should they open the box because this might cause contamination of the special Yilishen ants with inferior critters.
Fleecing the Gullible
In China, ants are believed to possess special properties that confer longevity, sexual potency, immunity to disease, and other benefits on humans. The dead insects were going to give life to humans by becoming an ingredient in a Viagra substitute. So, Wang Fengyou’s pitch fell on receptive ears.
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The Los Angeles Times reports that “Over an eight-year period, the company recruited as many as 1 million would-be ant farmers, collecting about $1.2 billion.”
A factory churned out pills to improve the health of the planet and the dead ants were even used to make wine―“You’ll be amused by its insouciance with hints of formic acid and Victoria sponge cake and a finish of tiny legs dancing upon the tongue.”
By 2006, Wang was a very wealthy man and a darling of the media. An image of some sort of folk hero was created for him. He came from a background of poverty and sold potatoes and bean curd to help support his family. He built his successful enterprise from nothing so the government anointed him with an award for being one of China’s top ten entrepreneurs.
But, the miracle cures offered by Wang’s pulverized ant bodies proved illusory. The U.S. Food and Drug Administration banned Yilishen products in 2004 saying they had absolutely zero health benefits. Sales of Wang’s magical elixirs started to slump and the company began to use investor deposits as income.
At the end of 2007, the Yilishen Tianxi Group filed for bankruptcy. Huge street protests bordering on riots followed.
Death to the Chairman
Once the auditors examined the entrails of the dead corporation they found the whole ant-farming business had been a rip-off.
Wang was arrested, tried, found guilty of “instigating social unrest,” and sentenced to death. It’s not clear if the execution was carried out. He may have escaped the lethal jab because he had close ties with senior government officials.
Fifteen company managers were given sentences of between five and ten years.
Scams such as this usually don’t last more than a year. That the ant-farming double-dealing lived on for eight years has led to allegations that government officials were bribed to look the other way.
The farmers who lost their savings have been shoved aside by government bureaucrats. Reporters have been told to drop the story and lawyers discouraged from representing the angry and depressed investors.
Several impoverished ant farmers have committed suicide including one man who set himself on fire in Beijing’s Tiananmen Square.
- According to the BBC program Quite Interesting “The largest insect colony is a super-colony of Argentine ants spanning Europe, the USA, and Japan. Despite being from different continents, these ants recognize and will refuse to fight each other.”
- Some cinemas in South America sell the roasted stomachs of leafcutter ants instead of popcorn.
- The ant population of the world is estimated to be about ten thousand trillion.
- In 1921, the American naturalist William Beebe discovered a group of ants trotting around in a circle of about 1,200 feet in circumference. This so-called “ant mill” happens when a group of foraging ants gets separated from the main party and loses track of the chemical trail they follow. The disconnected ants then follow each other in a circle until they drop dead from exhaustion.
- “Ants and Pyramids: China Scams Abound.” Kent Ewing, Asia Times, January 12, 2008.
- “Ants Lead to a Trail of Risky Investments.” Mark Magnier, The Los Angeles Times, January 12, 2008.
- “A Chinese Pyramid Scheme Built on an Anthill.” Asia Sentinel, December 3, 2007.
- “China Hit by Financial Scam ‘epidemic’.” Virginia Harrison, BBC, September 19, 2017.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2017 Rupert Taylor
Kari Poulsen from Ohio on October 25, 2017:
I guess dishonesty goes on all over the world. :(