A growing scandal around an investment company that has lost $2.3 billion has affected pensions for up to 880,000 people, Japan's government said Tuesday. AIJ Investment Advisors has reportedly been lying to clients for years, boasting of annual returns of up to 240 percent while in fact 185 billion yen in pension investments has melted away. The company's operations were suspended last week and the government ordered a probe of 260 asset management firms nationwide after allegations that most of the money in its care had disappeared. The scandal has shocked Japan, where a rapidly ageing middle class population is increasingly looking to private pension funds, while the state retirement pot also struggles due to gross mismanagement of its own. The government said Tuesday that the 185 billion yen was from 84 separate pension funds, and affected 540,000 employees who were saving for retirement, as well as more than 340,000 people already drawing their pensions. Most of the 84 funds entrusted fractions of their savings to AIJ, but 13 funds had a quarter of their investments exposed to AIJ, the health ministry said. The company, which was set up in 1989, has consistently reported healthy returns on investments since the start of the last decade, but financial regulators now say the bulk of the money it looked after is gone. It was not known whether the money was lost due to market turbulence or because the firm diverted it for other purposes. The head of the Financial Services Agency (FSA), Shozaburo Jimi, said he had ordered investigations into the assets of 260 investment management firms. "We will put all of our efforts in to clarify the facts of the AIJ case. We will get to the truth and draft ways to prevent similar incidents in the future," he told a press conference. Exact details of how much has been lost were not available as the FSA said it was unable to comment on an ongoing investigation. The case, however, has further highlighted the gap between what the greying nation needs and its creaking public pension system, run by a government already saddled with debt worth double the nation's GDP. The state borrows money to finance roughly a half of its annual budget, amid dwindling tax income due to two decades of economic stagnation and a shrinking workforce caused by population decline.