Insurer accused of running a Ponzi scheme

Shanghai FanXin Insurance Agency, a major insurer in Shanghai, has been accused of running a Ponzi scheme, with those working for the company among the victims, an individual broker of the company told the Global Times on Wednesday.

"Just as the customers of the insurance agency, I am also a victim anxiously waiting for a solution," said the broker surnamed Wu, who is finding it hard to explain to his ­customers, family members and friends, who have bought his company's products through him.

Chen Yi, the general manager of Shanghai FanXin who fled with 500 million yuan ($81.6 million). was arrested in Fiji and taken back to China, the Xinhua News Agency reported Tuesday citing the Ministry of Public Security.

The case was reported to police in Shanghai on August 12, according to the ministry.

The ministry asked for international law enforcement forces for help and found Chen in Fiji.

The ministry sent a work team to Fiji and seized Chen in cooperation with the local police, it said.

Chen is reportedly accused of committing fraud by selling wealth management products in the name of insurance policies and promising buyers with high investment returns, while taking high commission from insurers.

On August 15, the Shanghai branch of the China Insurance Regulatory Commission (CIRC) said the company was selling unauthorized fixed-income financial agreements.

Wu told the Global Times that the company offered 10 percent annual investment return, much higher than the 3.25 percent one-year benchmark fixed deposit rate as well as the returns of most other wealth management products offered by banks. More than 80 percent of the agency's employees had bought the products.

Lured by high returns, Wu bought the product not only for himself but also ­persuaded his family members and friends to buy. Their total investment is over 300,000 yuan, he said.

Wu said the case reveals a loophole in the supervision by the insurance regulator, as the company, the largest insurance brokerage in Shanghai, has been approved by the CIRC and has a reputation of fulfilling its promises.

The CIRC has sent a 10-member team to investigate the agency, China Business News reported Wednesday citing sources. The CIRC was not immediately available for comment on Wednesday.

Established in July 2007, Shanghai FanXin focuses on life insurance brokerage ­service and employs about 800 ­brokers. Its premium income reached 480 million yuan by end of 2012, the company said on its website, which is still ­operational.

Most of Shanghai FanXin's customers bought insurance products of Happy Life Insurance and Kunlun Health Insurance through the agency, Caixin reported Tuesday, citing unnamed source.

Happy Life Insurance was not aware that Shanghai FanXin utilized their policies to sell wealth management product to customers until the CIRC's notification, Happy Life told the Global Times in an e-mail Wednesday.

Happy Life also said that it has terminated cooperation with Shanghai FanXin, but the authenticated insurance products that customers already bought from the insurance brokers including Shanghai ­FanXin are still valid.