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At every turn in his improbably rapid rise, Ding Ning, 34, went to great efforts to convey the image of strong government backing for his Internet financing business.

There was his company’s lavish annual meeting and banquet last year in Beijing’s Great Hall of the People, where China’s legislature meets and where top government leaders host official functions. Adding a splash of celebrity to the event were Zhou Tao, a nationally famous actress and host on the government’s main television broadcaster, and several mid-ranking officials, bureaucrats and lawmakers. There were the positive profiles in state-controlled media, as well as the company’s advertising on official TV. There was the section of his company’s website devoted to building Communist Party spirit. But it all came crashing down in dramatic fashion for Mr. Ding this week, when the police alleged that his financing business, Ezubao, was a $7.6 billion Ponzi scheme and announced 21 arrests, including of Mr. Ding. The company was shut down. The charges were conveyed by the same official outlets whose favor Mr. Ding once curried — CCTV, the official TV broadcaster, and Xinhua, the main government news agency. And for some investors and employees, that apparent reversal smacked of hypocrisy. “One day, you praise the company, another day, you criticize it. Exactly what’s going on?” asked Yang Fan, 29, a Beijing resident who worked at Ezubao until December. “It’s hard for it to be this big without government support,” he said, adding that like many employees he is still owed money by the company. “We really want an answer. We all are victims.” The demise of Ezubao highlights a precarious challenge for the Chinese government. Beijing has actively promoted Internet finance as a way to make affordable credit available to more businesses and consumers, potentially helping to cushion the blow of the country’s slowing economic growth. Investors have embraced the model with gusto, helping China surge past the United States last year to become the biggest global market for such lending, according to estimates by Morgan Stanley.

But regulation of the sector has failed to keep pace with its explosive expansion, and that has left it ripe for abuse, putting ordinary investors at risk. The prospect of angry investors and former employees taking to the streets in protest is anathema to China’s leadership, which may explain the prompt and high-profile action seen so far in the Ezubao case. Ezubao sold itself as a peer-to-peer lender, which matches investors with potential borrowers online. Ezubao also said it specialized in helping companies raise funds for equipment leasing. Set up by Mr. Ding’s main holding company, Yucheng, in July 2014, Ezubao grew quickly. It drew in funds from nearly one million investors by promising annual returns as high as 15 percent, much higher than bank deposits or many other peer-to-peer lenders. But more than 95 percent of the investment products Ezubao marketed on its platform were fake, Xinhua said this week, citing local officials. Instead, investors’ funds were used to enrich Mr. Ding, his family members and other top executives, including attractive women whom he put on payroll and lavished with expensive gifts, Xinhua said. Those included real estate, cars and luxury goods, like a villa in Singapore valued at 130 million renminbi, or $20 million, according to the Xinhua report and a confession made by Mr. Ding that was televised by CCTV this week. Executives went to great efforts to conceal their ruse, according to the Xinhua report. Those efforts included literally burying the evidence: Police in China’s Anhui Province, where Ezubao is based, deployed two excavators that worked for 20 hours to dig up some 1,200 documents that were buried nearly 20 feet underground at a site on the outskirts of Hefei, the provincial capital. In interviews, former staff and investors described the signals of strong state support as one of the keys to Ezubao’s rapid rise.

“Many people joined Ezubao because they saw the support from the government and from some government officials,” said Feng Zhe, 36, a Beijing resident who worked as a salesman at the company from June of last year until December. Mr. Feng said a number of his friends and family members invested in Ezubao’s products and suffered losses. “Many people bought their products because the government has lent the company credibility,” he added. Luo Kaichen, 30, said he decided last July to invest 1 million renminbi in Ezubao, at an interest rate of 14.6 percent. Mr. Luo, a former banker who now works at an e-commerce company in Beijing, said he had not previously invested in online financing products. But friends were recommending Ezubao, and after he did some research, he was impressed. Ezubao had received positive reviews and coverage in articles posted on a number of central government websites. “Not every company will receive complimentary articles on government websites,” he said.

The company also placed advertisements on CCTV, the state broadcaster, which Mr. Luo took to mean it had passed some level of official scrutiny. “Those advertisements usually would require strict vetting,” he said. “After all, CCTV is a media organization, but also part of the state.” CCTV declined to comment. A person in the office of the station’s chief editor who answered the phone on Friday said, “We have no knowledge of the situation.” In addition to Ms. Zhou, other luminaries who appeared in public on behalf of Ezubao included Guan Tong, another CCTV anchor. Neither could be reached Friday for comment. Officials from the National People’s Congress; a research institute under the State Council, or China’s cabinet; and even some of China’s lesser-known political parties have also showed up at promotional events for Ezubao. While the investigation into Ezubao continues, the circumstances of the case have prompted calls for a thorough exploration of who was involved in carrying out the alleged fraud and whether corruption of government officials or regulators came into play. “We advise government to investigate this clearly to identify criminal intent and motive,” the Beijing Lawyers Association said in a statement this week after being asked by the city’s justice bureau to give advice on the case. “Any corruption or crimes involving government and supervision departments should be punished,” it added. But for investors who lost their funds, it remains to be seen whether there is any hope of getting their money back. Zhang Wenru, 24, works at a steel company in Baotou, a city in Inner Mongolia. He saw an ad for Ezubao in October on CCTV and decided to invest 20,000 renminbi, at an attractive interest rate of 14.6 percent annually. “I thought to myself, now that it’s on CCTV, there should be a lot of credibility,” Mr. Zhang said. “So I thought why not give it a try?” Once reports started surfacing in December that Ezubao was under investigation, Mr. Zhang became concerned. He attempted to withdraw his funds, but there was a problem with Ezubao’s text-message authentication system. Angered, he decided to report the matter to the police.

“Of course I want my money back, but overall I am quite at ease with myself,” he added of his current situation. “If I can get back the money, great. If not, let it be. It’s just my salary for half a year.”