Gao Feng, deputy director of Bureau on Economic Crime under the Ministry of Public Security, speaks at a press conference on Tuesday, May 9, 2006.

Chinese police have arrested 20,500 people involved in 2,848 cases of illegal pyramid selling from 2001 to 2005, the police authority said on Tuesday.

"After spreading nationwide, pyramid selling has developed into a serious crime," said Gao Feng, deputy director of the Bureau on Economic Crime under the Ministry of Public Security.

Gao told a press conference that more than 4.21 billion yuan (519.8 million U.S. dollars) was involved in the 2,848 cases.

"Illegal pyramid selling is a severe economic crime that poisons people's minds, damages the economy and threatens efforts to build a moderately prosperous society," Gao said.

Pyramid selling was introduced in China in the 1990s. Since then, some people have sold fake and inferior-quality goods through illegal pyramid selling means.

In 1998, the State Council issued a notice prohibiting all kinds of pyramid selling in China. But in recent years, pyramid selling has reappeared, prompting a crackdown by the Ministry of Public Security last year.

Since last May, Chinese police have uncovered 516 illegal pyramid selling cases and arrested 3,408 criminal suspects.

Gao said most people involved in pyramid selling are migrant workers, laid-off workers and other low-income citizens. Some government and Party officials and students also participated in the illegal activity. However most people involved could not earn money at all. Some even went bankrupt and became vagrants.

Chinese police arrest Koreans in pyramid selling scheme

Chinese police have arrested four Republic of Korea citizens after breaking the first foreign-organized pyramid selling network, seizing more than 13 million yuan (1.6 million US dollars).

The Ministry of Public Security said in a statement Tuesday that the scheme involved about 1,800 people selling cosmetics and sportswear in east China's coastal city Qingdao.

The alleged gang leader, surnamed Lee, and three others established the network in June 2004, requiring each participant to recruit five other people in the level below from whom they took commissions.

In Dec. 2004, the gang also registered a department store and a clothing company, which operated illegally by charging a 2,000 yuan membership fee and offering members a commission to recruit shoppers.

The Qingdao procuratorate is preparing to prosecute the four culprits.

Editor: Yan