Global asset managers entering China, such as Fidelity International and Neuberger Berman, are struggling with scams where online fraudsters use their logos and brands to entice investors with fake high-return promises.
This scam, known locally as “pig butchering,” involves fraudsters luring victims with attractive returns before disappearing with their money.
New market players like VanEck and Alliance Bernstein have also become victims of these sophisticated schemes, which have prompted China’s securities regulator to issue a public warning against fraudulent fund-raising activities falsely claiming ties to foreign asset managers.
These scams pose significant reputational risks for global asset managers already dealing with trademark issues, geopolitical concerns, and stiff competition in the Chinese market.
The surge in these scams reflects both the hunger for returns among Chinese investors in an economy with limited investment options and the relatively low risk of getting caught for online fraud in China.
“This is quite annoying,” remarked Yin Ge, a lawyer at Han Kun Law Offices who assists asset managers in dealing with defrauded clients, often from smaller cities.
Ge noted that there are “too many swindlers in China” and that law enforcement may lack the technological and human resources to tackle every case.
Fidelity International, set to launch its first mutual fund in China on April 3, cautioned that its name and logo have been misused on various websites and social media platforms in China.
Fidelity warned investors to be wary of fraudulent schemes that falsely claim to represent well-known institutions to appear legitimate.
Neuberger Berman, which launched its first retail fund in China this week, reported similar issues with its brand being misused by fraudsters to raise money illegally through websites, WeChat groups, and mobile apps.
Neuberger Berman has reported these incidents to local authorities, who are currently investigating the matter.
According to an unnamed executive at a consultancy for global asset managers in China, these scams proliferate during economic downturns as fraudsters capitalize on news of foreign funds entering China to target unsuspecting investors, particularly in smaller cities.
Some scammers even replicate the programming of a foreign fund manager’s website to make their schemes appear authentic, exploiting the low risk of detection.
There is no official estimate of the scale of these “pig butchering” scams, but a source with direct knowledge mentioned that VanEck has been dealing with multiple waves of fraud since mid-last year.
The scams involving VanEck’s brand first appeared in Guangdong and Guangxi provinces, later spreading to Sichuan province. Typically, these fraudsters shut down their operations once they have collected enough money.
VanEck has publicly stated that some fraudsters are using its name to promise “high returns” and “low risk” through well-crafted schemes.
One victim, whose husband was defrauded in a VanEck-branded scam, revealed that around 300 investors have banded together to try and recover their losses by reporting the fraud to the police, with some losing millions of yuan.
Alliance Bernstein, which is pursuing a retail fund license in China, also urged investors last year to be “highly vigilant” against fraudulent schemes exploiting its name.
Lawyer Yin Ge emphasized that such public statements are crucial for these institutions to protect their reputations and urged investors to conduct basic due diligence before investing.
