China: Hundreds arrested over banking scandal that triggered protests

Chinese authorities arrested 234 people linked to a banking scandal that triggered mass protests and violence earlier this year.

One of China's biggest-ever banking scandals unfolded as people were swindled out of their savings after being lured with false promise of high interest rates on deposits in six rural banks in central China's Henan and neighboring Anhui province.

According to authorities, the alleged mastermind, Lu Yiwei, and his associates in some cases offered interest rates as high as 18% annually.

Following regulator crackdown, four banks in Henan province suspended cash withdrawals in April, freezing thousands of customers from accessing funds in their accounts. These led to protests that, at times, ended in violence.

Containing the fallout

Police said Monday along with the arrests "significant progress" was being made in recovering stolen funds.

"At present, the public security organs have apprehended a large number of criminal suspects, among whom 234 were arrested," a Xuchang city government statement said.

The scale of the fraud caused a massive dent in public confidence in China's financial system, analysts said.

Authorities scrambling to contain the damage from the scandal announced that depositors will be repaid. The repayments started in mid-April.

While smaller deposits were paid first, on Monday, the Henan banking and insurance regulator promised to repay those who had deposited between 400,000 and 500,000 yuan (€57,909 to €72,311) starting this week.

Quashing protests

The scandal drew national attention in China after investors seeking answers suddenly found their mandatory COVID-19 phone apps altered to status that confined them to their homes, preventing them from legally going to the banks.

Later in July, the protesting investors were attacked by men in white shirts as police stood watching.

Multiple bank customers told AP that they had been interrogated and threatened by police.