A number of stories around Ponzi schemes have rocked what is sometimes loosely dubbed the shadow banking sector in China.

A top executive at Shanghai-investment firm Zhongjin Capital Management has reportedly confessed on state television to running a Ponzi scheme fraud.

In April, police in China accused the entity of illegal fund-raising and scores of executives were arrested.

"The way we operated our fund was with a Ponzi scheme method," Xu Qin said on China's official state broadcaster, China Central Television (CCTV), according to Reuters. Xu has not been formally tried in court. The news service said it was unable to contact Zhongjin or Xu for comment.

"We used money from investors who came later to pay the interest owed to earlier investors," Xu was quoted as saying. "It was actually an extremely typical Ponzi scheme," he added.

China’s peer-to-peer and alternative finance sectors – sometimes dubbed the shadow banking market – have been hit by a number of scandals. The offences have happened at a time when investors have been lured by promises of yields above what can be earned in more conventional markets. 

In February this year, a scandal around a Ponzi-scheme fraud broke which also engulfed China’s largest peer-to-peer lender. Chinese authorities busted a scam involving over RMB50 billion ($7.6 billion). The case surrounds Ezubao, the P2P lender. At least 21 persons were arrested. Ezubao was launched in July 2014 and has launched an aggressive advertising campaign. Instead of engaging in legitimate lending, the operators of the business reportedly invented most of the projects listed on its website and used funds from new investors to repay older debts, in a classic Ponzi structure.

In another case, police took over the headquarters of the Fanya Metal Exchange, a trading platform for nonferrous metals, late in 2015 and are still probing an alleged multibillion dollar Ponzi scheme involving more than 200,000 investors (source: South China Morning Post).