BEIJING, Dec 13 (Reuters) - A Chinese company that raked in billions of yuan raising ants to make an aphrodisiac tonic has filed for bankruptcy, an official Web site said.
Thousands of angry investors took to the streets of Shenyang, capital of Liaoning province, last month to demand help getting their money back from Yilishen Tianxi Group, besieging government offices and disrupting traffic.
Yilishen, which began making ant tonic in 2001, had filed for bankruptcy and was undergoing liquidation, the English-language report on www.china.org.cn said.
The ant business appears to be fraught with risk. In February, a Chinese man was sentenced to death for conning people out of 3 billion yuan ($387 million) in an ant-breeding scam also based in Liaoning.
The chairman of Yilishen, Wang Fengyou, has been arrested on charges of instigating social unrest, the Web site said. He is suspected of paying employees and company executives to organise counter-protests outside government offices.
The investors said Wang’s cozy ties with the government had added to the scheme’s credibility. Wang was named a model private entrepreneur in 2006.
The investors — many of them laid-off workers or farmers — put their savings into a scheme in which they bred ants to provide ingredients for a tonic promising an aphrodisiac boost. For every 10,000 yuan ($1,350) investors paid Yilishen as a bond, they were promised a dividend of 3,250 yuan.
Since October, the group twice delayed payment of dividends, fuelling investor fears that it was on the brink of bankruptcy or that the government might have frozen its funds. A third delay stoked anger.
"The firm stopped paying last month and the angry ant farmers feared they would lose their bonds and payments," the Web site quoted police as saying.
Chinese media have said the scheme collected more than 10 billion yuan from hundreds of thousands of Liaoning residents. Some reports dismissed the whole project as a scam.
Residents have said police had set up checkpoints and taken other steps to keep a close eye on potential trouble. Breeders heading to provincial capital Shenyang were stopped.
Underlining the sensitivity of the issue, almost all online discussions about the case have been censored and the Beijing city government has asked lawyers in the capital not to represent any breeders to ensure "political stability", according to a notice on the Web site of the Beijing Municipal Laywers Association (www.bmla.org.cn).
Lawyers were also advised not to accept interviews by Chinese and foreign media.
Phone calls to Yilishen went unanswered and the company has made no public statement. (Reporting by Benjamin Kang Lim, editing by Nick Macfie)