“They promise the dream of making a fortune,” said Liu Libing, a former victim who runs a business helping families find missing relatives. “In reality, they brainwash you and hold you against your will.”
The government announced a nationwide crackdown on the schemes in August after the death of Li Wenxing, 23, a recent college graduate whose body was found in a pond in the northern city of Tianjin.
Mr. Li had moved to Tianjin for a position as a software developer, desperate for a job his parents in rural China would deem worthy of the education they helped pay for. But when he showed up for work, the people there demanded he borrow hundreds of dollars and hand it over, according to his family and the police.
Mr. Li’s death and a spate of similar cases have prompted a national uproar, in part because college graduates have long enjoyed special status in Chinese society. For many Chinese, the groups preying on them are a symptom of broader problems in the country: vast inequality, a crisis of values and a freewheeling economy that can sometimes resemble the Wild West.
The party has long worried about the destabilizing impact of pyramid schemes, which have thrived in China since it began loosening controls on the economy in the 1980s. For many years, the authorities even banned multilevel marketing tactics, likening companies such as Amway and Avon to “secret societies,” before lifting the prohibition in 2006.
But the government recently warned that pyramid schemes were spreading faster and getting bigger, in part through social media. The high returns they promise are all the more enticing as economic growth has slowed, especially given the dearth of reliable investment options for ordinary Chinese.
A key concern has been the unflinching loyalty that some groups inspire, threatening the party’s tight grip on society. A recent mass protest in Beijing reinforced such fears: The demonstrators were not demanding compensation or an investigation into a pyramid scheme but protesting the arrest of its founder.
The state-run Legal Weekly newspaper later reported that in the…