Overseen by the Public Security Ministry in cooperation with various regional law enforcement bodies, local police broke up the Yunshumao, or cloud data trading platform, according to police representative Zhang Yunchuan.
"The illegal organization was covered by patriotic mottoes, which seduced people," Zhang was quoted as saying by the broadcaster.
Yunshumao apparently charged people some $388 for an entry-level key into the pyramid, offering them a chance to themselves charge others to enter and make a profit after inviting three more people.
The organization held various events to attract more members but did not behave as a sect and was thus more difficult to uncover.
The Chinese government is highly averse to pyramid schemes, including multi-level marketing (MLM), and views these as harmful to the economy. MLM was outlawed in 1998 after it first swept the country amid market reforms. MLM uses real products to disguise pyramid schemes, while some online pyramids only handle upward money transfers between users.
