Beijing has cracked its biggest-ever pyramid scheme, totaling over 1.6 billion yuan (US$206 million) in illegal funds, according to the Beijing Municipal Public Security Bureau.

The Yilin Wood Company swindled more than 20,000 people nationwide, including 17,000 in Beijing, since April 2004, said Fu Zhenghua, deputy director of the bureau.

Police evidence shows how the company cheated investors through lucrative offers of high returns on sales of woodland. They used a pyramid selling model, through which one salesperson recruits more salespeople who turn recruit more, according to the bureau.

Even though pyramid selling is legal in some countries, it was banned in China through a cabinet regulation in 1998. Chinese authorities view such schemes as avenues for cheating and hoodwinking unsuspecting citizens.

The Beijing police have arrested 18 people and seized or frozen part of the company's assets and illicit gains, said the bureau. The company's Beijing office was closed down on Thursday.

Fu added that police are hunting other high-ranking members of the selling scheme around the country and are trying to quickly recover investors' losses.

Chinese law stipulates that organizers of large-scale pyramid scheme face prison terms of five years or more and fines of up to five times the profits generated by their illicit activities.

(Xinhua News Agency February 12, 2007)