Quite an unusual pyramid scheme was built by a Chinese businessman Wang Fenguou. In 1999, he opened ‘Yilishen Tianxi Group of China’, to make health products whose main ingredients were ants, including a version of Viagra. Wang Fengyou offered anyone who wishes to become an investor for just $ 1,500.
For the money investors received a box with special ants, which had to be fed and grown in the special box within 90 days. After this time the company’s representatives came and took the insects back, recycling them into Aphrodisiacs or cure for arthritis. At least that was what the company informed poor Chinese farmers.
Still from the commercial for Yilishen Tianxi Group of China
At the end of every 14 months of such a hassle, investors received about $ 450, equivalent to 32% annual yield. This pyramid was also a success because Wang Fenguou became rich pretty quickly and was able to become known in newspapers and on television. He was even nominated state award ‘100 best businessmen in China.’ The company was endorsed by Chinese government officials, and Wang, now the chief executive, was photographed with the former Minister of Commerce of the People’s Republic of China, Bo Xilai.
Investors, mostly unemployed factory workers or peasants, were instructed to feed the ants sugar water, egg yolk and cake, with the promise that after three months, they could sell them back to the company. Yilishen Tianxi built a factory to produce pills and wine made from the dead ants; Yilishen products were sold in more than 50,000 Chinese pharmacies, and the company’s annual revenue was 15 billion yuan. When the company’s turnover amounted approximately two billion dollars, Wang’s ant scheme collapsed, and he himself was arrested and sentenced to death.
Ponzi Scheme is an investment scheme that provides incomes of earlier investors on account of the funds received from later investors. At first, it may seem perfectly legitimate, but Ponzi scheme is usually destroyed as soon as the flow of funds from new investors is no longer sufficient to make payments to the old ones. The scheme is named after Charles Ponzi, who is notorious for using this affair in early 1920. Ponzi is not the author of the idea, but he was the first con artist in the United States who managed to get a huge amount of investment.