An alleged Ponzi scheme run by Health Mall, a Chinese sports and fitness app, has caused investors—including tens of thousands of teachers and students at 444 colleges and universities across China—to lose several billion yuan (about $1 billion), Chinese media recently reported.
Health Mall, launched in 2015, was developed by Guangzhou Elephant Health Technology Co. and is based in the eponymous southern Chinese city. The app helps users generate a personal exercise plan, which could include hiring a personal trainer, using specific types of exercise equipment, and purchasing various exercise-related products.
Users could book private exercise lessons on the platform. Personal trainers who register with Health Mall an advertise their lessons on the platform. If a user books the class, the trainers get paid an additional 15 percent of the tuition as commission, which would be disbursed within three to 10 days of the lesson. or example, if a user looks a $50 class, the trainer gets $7.50 in commission, in addition to the $50 tuition.
But he company encouraged users to cheat the system by creating personalized lessons and buying lessons themselves to earn commission—akin to making a monetary investment. The company claimed 250,000 people registered for its app. After the platform hut down on July 23, users lost all the money they had invested.
Guangzhou police issued a notice Aug. 27, stating that Health Mall’s parent company, Elephant Health Technology, is suspected of illegally luring the public to deposit money into a pyramid scheme. The company’s legal representative, Yang Yuli, and other eight suspects were arrested.
One of the victims of the alleged scheme, Mr. Wang, a sophomore student at a college in Jiangxi Province, told the Chinese language Epoch Times on Sept. 17 that it was only after victims pleaded with local police to take action that the suspects were arrested. About 1,000 victims gathered outside of the company building in Guangzhou on Aug. 26 to ask for an investigation of the company. Guangzhou authorities mobilized more than 400 police to suppress the gathering, and more than a dozen people were arrested.
But under pressure, the Guangzhou police filed the case and arrested the nine suspects the next day.
Mr. Wang said he registered with the Health Mall app in March. After borrowing money from his parents and via cash advance on his credit card, he invested more than 300,000 yuan ($43,680). He lost all his money after the company closed.
The victims said that no one actually taught any of the lessons, and many users created and bought their own lessons as encouraged by the company, the victims told The Epoch Times.
Health Mall is popular among the sports world in China. Victims included national sports champions, Olympics champions, and famous professors and coaches from top athletic colleges and universities, including East China Normal University, Shanghai University of Sport, Chengdu Sport University, and Beijing Sport University.
Mr. Wang said his professor has lost more than a million yuan (about $145,603).
Mr. Liu, who just graduated from a university in Shanxi Province and now works in Beijing, told the Chinese language Epoch Times that the five or six people at his school who registered with Health Mall lost 10 million yuan ($1.46 million). Liu had invested more than 400,000 yuan ($58,241) in Health Mall by borrowing money from credit cards and apps; he lost all of it.
Liu added that because colleges and universities have tried to silence students, they can’t protest. Some have sold their houses and cars to pay off their debts.
Because Guangzhou police haven’t initiated a national investigation, victims say that when they appeal their cases at various levels of government—including the national sports authority, the General Administration of Sport of China, and the central office for accepting grievances, the Bureau of Letters and Calls—their cases aren’t accepted.
Epoch Times staff member Gu Xiaohua contributed to this report.