The Supreme People's Court and the State Administration for Market Regulation jointly released typical cases of lawful punishment of online pyramid selling crimes

With the networking of social life, the crime of online pyramid selling has new characteristics that are different from those of traditional pyramid selling crimes in terms of organizational structure, participation mode, and mode of behavior, showing a trend of being more hidden, spreading faster, involving more people, affecting a wider area, and involving a larger amount of money, seriously disrupting the order of the market economy, seriously undermining the social credit system, and seriously harming the vital interests of the masses. The people's courts give full play to the role of adjudication functions, do a thorough and solid job of serving the overall situation and administering justice for the people, continue to maintain a high-pressure posture of punishing online pyramid selling crimes, accurately implement the criminal policy of blending leniency and severity, and work with the departments for market regulation to advance governance at the source and comprehensive governance, and truly protect the lawful rights and interests of the people.

The Supreme People's Court and the State Administration for Market Regulation hereby jointly release Typical Cases of Lawfully Punishing Crimes of Online Pyramid Schemes, so as to give full play to the educational, warning, and deterrent effects of typical cases. The five typical cases released this time have the following three characteristics:

The first is to focus on new forms and forms of online pyramid schemes, and accurately characterize and deal with them in accordance with the law. Under the influence of the cross-regional, virtual, and interactive nature of the Internet, online pyramid marketing uses new formats and new models as gimmicks and new media as the basis, showing that the criminal path has changed from "offline expansion" to "online and offline aggregation", the criminal targets have changed from "drip irrigation of acquaintances" to "flood irrigation", and the development and change of criminal media from "physical goods" to "virtual goods". In the typical cases released this time, each defendant and defendant unit required participants to pay fees or purchase services to obtain membership qualifications in the name of obtaining high rebates through investment, and formed a hierarchy of participants in a certain order to lure participants to continue to develop downlines and defraud money, and the people's court accurately determined that each defendant and defendant unit constituted the crime of organizing and leading pyramid selling activities in accordance with the principle of consistency of subjectivity and objectivity.

The second is to give full play to the deterrent effect of criminal punishment, and implement the criminal policy of blending leniency and severity. Persist in severely punishing key members who organize and lead online pyramid marketing activities with a large number of times, deep subjective malice, and serious circumstances. In the case of defendant Zhang's organization and leadership of pyramid marketing activities, Zhang, as the ringleader of the pyramid marketing organization, was sentenced to 15 years imprisonment and fined 100 million yuan. At the same time, the people's courts are to comprehensively consider the subjective and objective circumstances of the perpetrators of online pyramid schemes, make full use of the laws and policies, and give lenient punishments to defendants with lower levels, less subjective malice, and less profits. In the case of the defendant unit, a certain company in Zhejiang, which organized and led pyramid marketing activities, the defendant unit had normal business operations and pyramid marketing activities at the same time, and some young people who had not been employed for a long time and were not deeply involved in the world were involved.

The third is to pay attention to the interpretation of the law and reasoning on the crime of online pyramid schemes, and strive to improve the ability of the masses to identify pyramid schemes. The new type of network pyramid scheme crime is spread in many places, which is more concealed and confusing, making it difficult for participants who do not know the truth to see through the organizer's scam for a while. In the course of adjudication, the people's court paid attention to explaining the law and reasoning, and in the case of the defendant Zhang X fraudulently using the name of public interest to organize and lead pyramid selling activities, it truly clarified the nature of the defendant's fraudulent use of charity to obtain money by fraud; In the case of defendant Yang X organizing and leading pyramid marketing activities under the pretext of promoting traditional culture, the essence of the defendant's use of feudal superstition to carry out pyramid marketing activities and collect money through offline classes was fully revealed; In the case of defendant Chen X and defendant Li X organizing and leading pyramid marketing activities, by lifting the veil on the defendants' pyramid marketing activities under the pretext of investing in "virtual currency" and "movie box office", the essence of the pyramid scheme organization's fraud was profoundly exposed, and the awareness and ability of the broad masses of the people to identify, prevent, and resist pyramid schemes was further enhanced.

In the next step, the people's courts, together with the departments for market regulation and other units, will adhere to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, thoroughly implement Xi Jinping Thought on the Rule of Law, fully base themselves on the new characteristics, new changes, and new circumstances of illegal and criminal activities of online pyramid schemes, severely punish illegal and criminal activities of online pyramid schemes in accordance with law, continue to exert efforts to eradicate the foundation of illegal and criminal activities, resolutely cut off the criminal chain, interest chain, and ecological chain of online pyramid schemes, do a thorough and solid job of "grasping the front end and curing the disease", and strengthen publicity and education on the prevention of the rule of law in online pyramid schemes. Promote the implementation of regulatory responsibilities for online platforms, actively build a new pattern of online and offline coordinated prevention and control, protect the people's "money bags", and continuously enhance the people's sense of gain, happiness, and security.

Typical cases of punishing online pyramid selling crimes in accordance with law

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1. Case of defendant Zhang organizing and leading pyramid marketing activities

-- Lawfully punish online pyramid schemes carried out in the name of public interest

2. Case of the defendant unit, a company in Zhejiang, organizing and leading pyramid marketing activities

-- Punish in accordance with the law the network pyramid schemes carried out by enterprises in the course of their business operations

3. Case of defendant Li X organizing and leading pyramid marketing activities

-- Punish in accordance with the law online pyramid schemes carried out in the name of high rebates

4. Case of defendant Chen X and others organizing and leading pyramid marketing activities

-- Punish cross-border online pyramid schemes carried out by investing in virtual currencies in accordance with law

5. Case of defendant Yang X organizing and leading pyramid marketing activities

-- Punish in accordance with law the use of feudal superstition to carry out network pyramid schemes

Case 1

Case of defendant Zhang organizing and leading pyramid marketing activities

-- Lawfully punish online pyramid schemes carried out in the name of public interest

[Basic facts of the case]

In May 2013, the defendant Zhang registered and established Shenzhen Shanmouhui Cultural Communication Co., Ltd. (hereinafter referred to as "Shanmouhui"). From March 2016 to July 2017, Zhang, together with Cha, Song and others, developed the "Good Huizhong Support Mutual Membership System" and put it into operation, carrying out pyramid marketing activities in the name of "poverty alleviation and symbiosis", and taking training, publicity and other ways to develop members throughout the country, requiring participants to pay 300 yuan to buy "good seeds" to obtain the qualification to join, and form a hierarchy in a certain order, and members will carry out capital exchanges according to the income rules determined by "good Hui". The number of development downlines is used as a rebate basis to defraud property. According to statistics, "Shanmouhui" has attracted more than 5.98 million members across the country, with 75 levels, and Zhang has made illegal profits of more than 2.5 billion yuan.

【Judgment Result】

After trial, the People's Court of Shuangpai County, Hunan Province, held that the defendant Zhang, through the establishment of a pyramid marketing organization, used the pretext of "poverty alleviation and symbiosis of equal wealth" to require participants to obtain membership qualifications by paying fees, and used high returns as bait to actively develop downline members, and formed hierarchies in a certain order, directly or indirectly using the number of development personnel as the basis for remuneration or rebates, to lure participants to continue to recruit others to participate, defrauding property, and disrupting economic and social order, and his conduct constituted the crime of organizing and leading pyramid marketing activities. and if the circumstances are serious, he was sentenced to 15 years imprisonment and a fine of 100 million yuan in accordance with law; Unlawful gains are to be recovered, confiscated, and turned over to the state treasury. After the first-instance verdict was announced, Zhang appealed. The Intermediate People's Court of Yongzhou City, Hunan Province, ruled to reject the appeal and uphold the original judgment.

【Typical Significance】

This case is a typical case of committing online pyramid schemes under the guise of public welfare. In recent years, under the guise of "charity" and "common prosperity," some criminals have used the cross-regional nature of the Internet to organize large-scale network pyramid schemes to illegally collect money in the name of raising "charity funds." In this case, in the name of "poverty alleviation and symbiosis of equal wealth", the defendant Zhang and others defrauded a huge amount of property and illegally made more than 2.5 billion yuan by planning, manipulating and recruiting personnel to participate in pyramid marketing activities, seriously disrupting the order of the market economy and seriously affecting social stability. The people's court correctly determined that defendant Zhang X was the principal offender in accordance with law, and sentenced him to a maximum sentence of 15 years imprisonment, and increased the punishment of fines, sending a strong signal of heavier punishment, and resolutely preserving a clean and upright environment for online charitable activities. At the same time, the broad masses of the people are reminded to enhance their awareness of prevention, and in the face of marketing in the form of "charity and mutual assistance", they must remain vigilant, do not believe the rhetoric of criminals, and consciously resist pyramid schemes and other illegal and criminal activities.

Case 2

Case of the defendant unit, a company in Zhejiang, organizing and leading pyramid marketing activities

-- Punish in accordance with the law the network pyramid schemes carried out by enterprises in the course of their business operations

[Basic facts of the case]

From April 2020 to January 2022, while operating a company in Zhejiang, defendant Qian, together with defendant Zhao and others, carried out pyramid marketing activities on the "smart charging pile mall system" network platform. In the name of selling charging piles and providing charging pile business services, the defendant unit and the defendant installed and operated a small number of charging piles through false propaganda such as claiming state support, and used charging, traffic, and advertising revenue as the guise to collect fees for the development of members with awards such as direct promotion awards, Bole awards, grade difference awards, and team awards as bait, and used the number of developed members as the basis for remuneration and rebates to lure and encourage members to continue to develop members at the next level. According to statistics, there are more than 20,000 users of the "Smart Charging Pile Mall System" network platform, with 25 layers and more than 1 billion yuan of funds involved. The facts of Qian's crime of illegally absorbing public deposits and embezzlement of office are omitted.

【Judgment Result】

After trial, the Shengzhou Municipal People's Court of Zhejiang Province held that the defendant unit and the defendant Qian and others required participants to pay fees to obtain membership qualifications in the name of investing in the smart charging pile project, and formed a hierarchy in a certain order, directly or indirectly using the number of development personnel as the basis for remuneration, inducing participants to continue to develop others to participate, defrauding property, and disrupting the economic and social order, and their acts have constituted the crime of organizing and leading pyramid marketing activities, and the circumstances are serious; Qian also constituted the crime of illegally absorbing public deposits and embezzlement. On the basis of circumstances such as the role of each defendant in the joint crime, the degree of participation, subjective malice, and post-crime performance, Qian X was sentenced to 18 years imprisonment for the crimes of organizing and leading pyramid selling activities, illegally absorbing public deposits, and embezzlement in public office; Zhao and 46 other defendants were sentenced to fixed-term imprisonment ranging from 7 years and 2 months to 10 months for organizing and leading pyramid selling activities, and 24 defendants including Zhang were given suspended sentences; The defendant unit and defendant are to be fined, and unlawful gains are to be recovered and confiscated, and turned over to the state treasury. After the first-instance judgment was announced, neither the defendant unit nor the defendant appealed, and the procuratorate did not raise a protest, and the judgment took effect.

【Typical Significance】

This case is a typical case of an enterprise implementing online pyramid marketing in the course of its business. In recent years, when some enterprises encounter financial difficulties in production and operation, they do not hesitate to take risks and use the Internet to carry out pyramid schemes, which has seriously disrupted the order of market management. In this case, the defendant unit carried out the crime of pyramid selling in the name of investing in smart charging piles, which was carried out simultaneously online and offline, and placed the organization and leadership of pyramid marketing activities in the business activities of the enterprise, which was highly concealed and deceptive. The people's courts adhered to the principle of legality of crimes, accurately determined that the unit committed the crime, sentenced the defendant unit to a fine, and lawfully determined that Qian X and the other 6 defendants were the principal offenders and sentenced them to five years imprisonment and fines based on circumstances such as the extent and role of each defendant's participation in the crime, their subjective malice, and their post-crime performance; The punishment of the remaining 41 accomplices was commuted, and a suspended sentence was announced for Zhang and others, who had participated for a short period of time, had fewer development downlines, involved a small amount of money, and returned illegal gains, and the punishment was given to the greatest extent within the legal framework. At the same time, this case also serves as a warning to the company's management personnel to abandon the luck mentality, stay away from online pyramid marketing activities, and operate in compliance with the law.

Case 3

Case of defendant Li organizing and leading pyramid marketing activities

-- Punish in accordance with the law online pyramid schemes carried out in the name of high rebates

[Basic facts of the case]

In August 2021, defendant Li was introduced by others to download the "XX Film and Television" App, knowing that the App was lured by investing in the box office of movies to obtain high returns, requiring members to pay a membership fee, and forming a hierarchy according to the amount of member investment and the number of developing members, directly or indirectly using the number of members as the basis for calculating remuneration and rebates, and he still promoted the App and absorbed members through WeChat, publicity among acquaintances, and other means. In October of the same year, Li was appointed as the general manager of the Shandong region of "XX Film and Television", and on November 19, the "XX Film and Television" App was closed, and members could not log in and withdraw cash. According to statistics, Li developed 2,152 people offline, with a level of 8, with an amount of more than 3.8 million yuan and a profit of more than 20,000 yuan.

【Judgment Result】

After trial, the Qihe County People's Court of Shandong Province held that the defendant Li, in the name of investing in the box office of movies to obtain high returns, publicized and promoted the "XX Film and Television" App, required members to pay a membership fee to obtain membership qualifications, and formed a hierarchy according to the amount of investment by members and the number of development members, and directly or indirectly used the number of members to develop as the basis for calculating remuneration and rebates, defrauded property, and disrupted the economic and social order, and his conduct constituted the crime of organizing and leading pyramid marketing activities, and the circumstances were serious. Li X was sentenced to two years and six months imprisonment and fined 10,000 yuan for organizing and leading pyramid selling activities, and had mitigating or mitigating circumstances such as voluntary surrender and return of illegal gains; Unlawful gains are to be recovered, confiscated, and turned over to the state treasury. After the first-instance verdict was pronounced, Li appealed. The Intermediate People's Court of Dezhou City, Shandong Province, ruled to reject the appeal and uphold the original judgment.

【Typical Significance】

This case is a typical case of online pyramid schemes implemented as bait to obtain a high return on investment. In recent years, there has been a clear trend of online and networked business investment, and some criminals have carried out online pyramid schemes in the name of high investment returns, resulting in many people suffering property losses. In this case, the defendant Li, together with others, took advantage of the speculative psychology of a small number of people on short-term high-income projects, pretended to be a high-yield film box office investment project, and relied on a registered website and mobile app client to carefully set up a film and television investment pyramid scheme, publicize and promote the "XX Film and Television" app, continuously develop members, absorb funds, and disrupt the economic and social order, and his conduct constituted the crime of organizing and leading pyramid marketing activities. The people's court comprehensively considered that Li X was introduced by others to download the app and promote it, and that there were circumstances such as voluntary surrender and return of unlawful gains, to reduce the punishment, to ensure that the punishment is commensurate with the crime. This case also reminds netizens to be vigilant against high-return investment scams and avoid falling into the trap of online pyramid schemes.

Case 4

Case of defendant Chen X and others organizing and leading pyramid marketing activities

-- Punish cross-border online pyramid schemes carried out by investing in virtual currencies in accordance with law

[Basic facts of the case]

At the beginning of 2018, defendant Chen and others used blockchain as a gimmick to plan to set up a "certain Token" network platform to carry out pyramid marketing activities, requiring participants to obtain a member account of the platform through online recommendations, pay virtual currency worth more than $500 as a threshold fee to obtain value-added services, and use the platform's "smart dog moving bricks" technology to conduct arbitrage transactions in different trading venues and obtain platform benefits. Members are composed of upper and lower levels in the order of recommended joining, and according to the number of downline members and the amount of investment, the platform will rebate in three ways: intelligent brick moving income, link income, and executive income, which are actually directly or indirectly based on the number of development personnel and the amount of payment. In order to escape the crackdown, Chen and others moved the platform's customer service group and coin dialing group abroad in January 2019, and continued to use the "Token" network platform to carry out pyramid marketing activities. According to statistics, there are more than 2.6 million registered member accounts on the "Token" network platform, with 3,293 layers, and a total of more than 9 million virtual currencies such as Bitcoin, Tether, and Yuzu paid by members.

【Judgment Result】

After trial, the People's Court of Yancheng Economic and Technological Development Zone, Jiangsu Province, held that the defendant Chen and others, in the name of business activities, required participants to obtain membership qualifications by paying fees, and formed hierarchies in a certain order, directly or indirectly using the number of development personnel as the basis for remuneration or rebates, inducing participants to continue to recruit others to participate, defrauding property, and disrupting economic and social order, and their conduct constituted the crime of organizing and leading pyramid marketing activities, and the circumstances were serious. Based on the defendants' role in the joint crime, the degree of their participation, their subjective malice, and their post-crime performance, Chen was sentenced to 11 years imprisonment and fined 6 million yuan for organizing and leading pyramid selling activities; The remaining defendants were sentenced to fixed-term imprisonment ranging from eight years and eight months to two years, and were also fined; Unlawful gains are to be recovered, confiscated, and turned over to the state treasury. After the first-instance judgment was announced, Chen and others appealed. The Intermediate People's Court of Yancheng City, Jiangsu Province, ruled to reject the appeal and uphold the original judgment.

【Typical Significance】

This case is a typical case of cross-border online pyramid schemes under the guise of new technological concepts such as blockchain and virtual currency. Based on the decentralized structure of the blockchain, virtual currency has the characteristics of anonymity and borderlessness, and has become an important object of cross-border illegal and criminal activities, and has spread to the field of online pyramid schemes. In this case, the defendant Chen and others used blockchain technology as a gimmick, used virtual currencies such as bitcoin as a medium of exchange, and under the guise of providing value-added services of virtual currency, to develop the number of members to calculate remuneration and obtain high rebates, illegally collected more than 9 million virtual currencies such as bitcoin, and set up the platform server overseas in order to evade detection, and their conduct constituted the crime of organizing and leading pyramid marketing activities. The people's court sentenced the corresponding criminal punishment on the basis of the position and role of the organizers and leaders of the cross-border online pyramid scheme in the entire criminal chain, and at the same time confiscated the virtual currencies involved in the case in accordance with the law, cutting off the defendant's economic ability to commit cross-border recidivism, and demonstrating the judicial organs' attitude of resolutely defending the security of Internet finance and maintaining the stable and healthy development of the financial market order.

Case five

Case of defendant Yang organizing and leading pyramid marketing activities

-- Punish in accordance with law the use of feudal superstition to carry out network pyramid schemes

[Basic facts of the case]

Since 2020, the defendant Yang and others have created the "Wan Mouhe" online platform under the pretext of "promoting Fuxi culture", successively developing key members such as Luo and Yan, and adopting a corporatized operation model that combines online and offline to sell courses such as "Chinese Name Studies", "Immediate Prosperity" and "Chinese Feng Shui". The "Wan Mouhe" online platform sets multiple levels of participants according to different payment amounts, obtains different amounts of rebates according to the levels, and through methods such as creating an atmosphere and showing up to speak, Yang will be built into a "Master of Geng Tianyuan" in the process of offline teaching, equipped with four "Dharma Protector Angels", deifying the defendant Yang can change his fortune, help people turn evil into good fortune, and develop his fortune, constantly brainwashing participants, and tricking participants into buying courses and developing offline. According to statistics, the MLM organization has attracted more than 120 members, with a level of 3 or above.

【Judgment Result】

The Binhu District People's Court of Wuxi City, Jiangsu Province, held after trial that the defendant Yang had lured the participants to obtain the qualifications to join by paying fees, and formed a hierarchy in a certain order, using the number of direct or indirect development personnel as the basis for remuneration or rebates, inducing the participants to continue to recruit others to participate, defrauding property, and disrupting the economic and social order, and his conduct had constituted the crime of organizing and leading pyramid marketing activities, and the circumstances were serious, and he was sentenced to five years and six months imprisonment and a fine of RMB 300,000 in accordance with law; Unlawful gains are to be recovered, confiscated, and turned over to the state treasury. After the first-instance verdict was pronounced, Yang appealed. The Intermediate People's Court of Wuxi City, Jiangsu Province, ruled to reject the appeal and uphold the original judgment.

【Typical Significance】

This case is a typical case of using feudal superstition to induce others to participate in online pyramid schemes. In recent years, it is not uncommon to use the Internet to engage in pyramid marketing activities related to feudal superstition, and related cases have shown corporatized operation, and the participants have fallen deeper and it is more difficult to save them. In this case, the defendant Yang X and others took advantage of the wide spread of the Internet to first use the method of inducement to develop members through the pyramid scheme model with rebates layer by layer, and then used offline lectures to trick others into participating in the pyramid scheme, the criminal methods were more concealed and the impact was more vile, and should be severely punished in accordance with law. The people's court found that the circumstances of Yang's organization and leadership of pyramid selling activities were serious, and comprehensively determined the punishment based on the sentencing circumstances of the entire case, to ensure that the punishment was commensurate with the crime. At the same time, this case warns the public that participating in pyramid schemes such as "changing names and changing fortunes" and other feudal superstitions may not only violate the criminal law, but also suffer property losses, and ultimately harm others and themselves.

Source: Information Bureau of the Supreme People's Court