The Chinese government is cracking down on the scams and pyramid schemes plaguing poorer parts of the country . "The rapid proliferation of pyramid schemes is caused by high growth in living costs, especially housing costs, which enticed many to look for higher returns - and previously light regulation at the local level," Prof Shih says. Virtual currencies and peer - to - peer networks are being blamed for the surge in financial fraud , though local Chinese banks have also fallen victim to dubious pyramid schemes in the hope of quick returns . The high cost of living and housing both contribute to the growth of pyramid schemes , according to David Shih , an expert at the University of California San Diego .
The Chinese government is cracking down on the scams and pyramid schemes plaguing poorer parts of the country . Virtual currencies and peer - to - peer networks are being blamed for the surge in financial fraud , though local Chinese banks have also fallen victim to dubious pyramid schemes in the hope of quick returns . The high cost of living and housing both contribute to the growth of pyramid schemes , according to David Shih , an expert at the University of California San Diego .