Death Sentence for Chinese Woman Convicted of $70 Million Ponzi Scheme

 A Chinese woman who masterminded a $70 million Ponzi scheme has been sentenced to death by a Chinese court - possibly by firing squad. Haiyan Lin, 39, from the Wenzhou province, received the sentence as part of a broader push by Chinese authorities to crack down on the underground lending industry that has found itself awash with cash as part of Chinese stimulus efforts. Haiyan is the latest of several women who have received a death sentence for their role in investment frauds.

According to Chinese authorities, Lin began soliciting funds in 2007, telling friends, former classmates, and family members that she could deliver high returns with little risk. While evidence suggests that her business began as a legitimate venture, she soon began to encounter heavy losses as a result of investing in multiple high-risk investments, including futures and speculative stocks. Lin eventually collected approximately $70 million from investors. 

However, instead of disclosing her mounting losses to investors, Lin instead continued to solicit new investments. In turn, Lin used funds from these newly-solicited investments to make payments to existing investors - a textbook example of a Ponzi scheme. The scheme eventually collapsed in October 2011.

China differs from the United States in that it allows the imposition of the death penalty for nearly sixty offenses, including fraud and economic crimes. By contrast, the United States allows only a handful of offenses to qualify for the death penalty. This results in one of the highest amounts of executions annually, with it estimated that China executed approximately 4,000 prisoners in 2011. This has also included death sentences for women accused of Ponzi schemes, including Wang Caiping, was sentenced to death last year after an investment fraud that racked up losses of nearly $20 million through risky futures and gold trading.

However, Chinese courts allow the commutation of a death penalty to life in prison after serving two years of the sentence, which was recently seen in the case of Wu Ying. Ying, who had been sentenced to death for a $60 million Ponzi scheme, had her sentence commuted to a life sentence in May 2012.

For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.

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