VIEs gained notoriety in the early 2000's due to their role in the Enron scandal, where the company used special-purpose entities to hide mounting losses from investors.
However, the VIE model was established for situations in which control may be demonstrated other than by the possession of voting rights in a legal entity.
VIEs came to prominence after Enron made "creative" use of special-purpose entities to conceal widening losses from its investors at the beginning of the 2000s.
The following is an excerpt from the Cayman Islands–registered Alibaba's Form F-1:"Due to PRC legal restrictions on foreign ownership and investment in, among other areas, value-added telecommunications services, which include Internet content providers, or ICPs, we, similar to all other entities with foreign-incorporated holding company structures operating in our industry in China, operate our Internet businesses and other businesses in which foreign investment is restricted or prohibited in the PRC through wholly-foreign owned enterprises, majority-owned entities and variable interest entities.
These contractual arrangements collectively enable us to exercise effective control over, and realize substantially all of the economic risks and benefits arising from, the variable interest entities...
[5]: 111 In July 2021, Bloomberg News reported that VIEs that have gone public may receive further scrutiny from Chinese regulators in their future offerings.
[10] Beginning in November 2020 and running through at least the end of 2021, SAMR began a major increase in the number of prior mergers involving VIEs that it reviewed.
[5]: 112 Robert D. Atkinson, an economist and president of the Information Technology and Innovation Foundation, said that VIEs have allowed U.S. investors to buy into "opaque" offshore shell companies of Chinese businesses.