Does the use of false identities by virtual platforms to attract investors to deposit funds necessarily constitute fraud?

Author: Mr. Zhang Chun, core lawyer of Guangdong Guangqiang Law Firm's Economic Crime Defense and Research Center, focusing on the defense of economic crime cases

"Virtual platform" refers to a trading platform in which the actor purchases or develops his own software to simulate a real trading platform to open a virtual futures, foreign exchange, stock and other financial derivatives trading platform.

1) The funds deposited do not enter the market, usually flowing into the actor or the actor looking for a third-party payment platform for safekeeping; 2) the actor and the investor bet; 3) the actor mainly earns the investor's handling fee, profit share, etc.; 4) some platforms call their employees to open courses as "lecturers" or "traders", recommend futures, stocks and other businesses, and guide investors to carry out "reverse investment" suggestions; 5) have not obtained the approval of relevant departments.

In judicial practice, in cases where the perpetrator opens a virtual platform to seek profits, some judicial organs hold that if the perpetrator has the purpose of illegal possession and uses fictitious facts or concealment of the truth to defraud a relatively large amount of public or private property, he shall be convicted and punished for the crime of fraud in article 266 of the Criminal Law. Some judicial organs, on the other hand, convict and punish the perpetrators with the crime of illegal business operations under article 225 of the Criminal Law: "Illegally engaging in securities, futures, or insurance business without the approval of the relevant competent state departments, or illegally engaging in the business of payment and settlement of funds."

Our lawyer believes that with regard to the characterization of such cases, it cannot be considered as a crime of fraud on the grounds that the perpetrator has opened a virtual platform, but should be comprehensively determined according to the operation mode of the actor to meet the constituent elements of the crime of fraud or illegal business operation. The crime of fraud can be punished by up to life imprisonment and illegal business operation is generally less than five years, so the qualitative debate has become the primary problem for lawyers to solve.

In practice, Mr. Zhang believes that when the virtual platform set up by the perpetrator is charged with fraud, it can be fought from the following four aspects, thus changing the characterization.

First, the actor does not modify the trading software, and the actor is aware of the payment fee, so the instigation and inducement of the actor only has a certain promotion effect on the investor and is not the direct cause of the investor's loss

The basic criminal composition of the crime of fraud is: the perpetrator fabricates facts and conceals the truth, resulting in a wrong understanding, that is, disposing of property based on wrong understanding. The perpetrator acquires property and suffers property damage. According to the theory of criminal law, only a criminal law causal relationship between the constituent elements constitutes a crime.

It is not that the perpetrator fabricates facts or conceals the truth, which will inevitably lead to property damage to others. The perpetrator's fiction or concealment of the truth may also be civil fraud, not fraud in the criminal law sense. Fraud and fraud are close to each other, and "fraud" emphasizes the nature and manner of conduct, without focusing on results; Although "fraud" indicates the same nature and manner of conduct, it emphasizes the results and purposes of the act. "Fraud" is sufficient as long as it fabricates facts or conceals the truth with the intention of causing a person to have a wrong understanding, and whether others have a wrong understanding is not a concern of "fraud"; The extension of "fraud" is much narrower, emphasizing not only the purpose of the perpetrator's unlawful possession, but also emphasizing that the act causes others to misunderstand and thus misjudge property.

In the relevant transaction, if the actor uses the virtual trading platform without knowing it, does not trade in the trading venue approved by the government department, or manipulates the market by modifying the data of the trading software system, etc., and makes profits from it, it is a fictitious fact, concealing the truth, and causing losses, because there is a direct causal relationship between the two, it shall constitute the crime of fraud. However, if the transaction does not have the modification of the trading software, etc., then the investor is aware of the transaction to pay a fee, although the instigation and inducement of the actor has played a certain role in promoting its high-frequency trading, but it is not a direct and main reason, and it is not because the act has a wrong understanding of the loss of the handling fee and then makes corresponding punishments, then this kind of behavior cannot be regarded as a fraud crime.

For example, in the (2019) Anhui 06 Xing Zhong No. 22 Criminal Judgment, although the perpetrator opened a virtual platform, the losses of the victims involved in the case were mainly high transaction fees, and the victims knew that the platform transactions would produce high handling fees, overnight fees, spreads and other fees when they invested, and the trading behavior was operated and decided by the investors themselves, and there was no situation in which the platform concealed the high handling fees and caused the investors to have a wrong understanding, so it did not constitute the crime of fraud.

Second, for the identity of "lecturer" or "trader", the establishment of courses, the recommendation of futures, stocks and other businesses, and the guidance of investors to carry out "reverse investment" suggestions are only subjective judgments, not definite results

Regarding the reverse suggestion, some actors, such as lecturers, judge the market trend through their own analysis, and then give customers what they think is a reverse market through other actors, such as salesmen. However, the market it gives is obviously not necessarily the opposite of the real market, because the analyst believes that the correct judgment of the market is his subjective judgment, not the result of certainty, and no one can guarantee that the judgment of the market is 100% correct.

As an adult with normal, rational thinking, you can decide how to trade independently, knowing that trading is risky. Agitation, induce high-frequency trading, and provide contrarian advice can only influence the judgment of the client, not necessarily lead to compliance with it. Even if you follow, you may not lose money but make a profit.

In some cases, even without the contrarian advice of the perpetrator, the investor can make his own decision to invest.

In some cases, it cannot be excluded that part of the transaction was not affected by the above and decided independently, so that the loss of this part of the transaction fee and the transaction loss are not directly related to the "reverse recommendation" behavior of the actor.

Others will question the false identity of the perpetrator as a "lecturer" or "trader", believing that the identity is a fraud of "fabricating facts and concealing the truth". Lawyer Zhang believes that.

In the case of Yi X et al. being convicted of illegal business operations [(2019) Anhui 06 Xing Zhong No. 22], the court held that although Yi X et al. had implemented the use of false identities to add ××× and WeChat friends, and used exaggerated publicity, impersonation of professional investment analysts to guide and other ways to induce customers to enter the platform to invest, the essence of the fraud in the fraud crime was to cause the defrauded person to have a wrong understanding of the disposition of the property and then dispose of the property, losing possession of the property. In this case, although Yi X and others induced customers to invest in exaggerated elements, the victims did not have a wrong understanding of the nature of the transaction that had an accident in futures profit and loss, and the fact that the customer entered the platform to invest in transactions did not mean that he would inevitably lose property, so inducing the customer to enter the trading platform to operate, encouraging the customer to add gold, and frequent operation could not be regarded as fraud in the crime of fraud. Therefore, in the absence of relevant business qualifications, in order to earn illegal profits, beyond the scope of the company's business, Yi X and others lured customers to invest in the futures trading platform with a false identity, charged high handling fees, etc., disrupted the market order, the circumstances were serious, and their behavior has constituted the crime of illegal business operation.

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Third, although the funds have not entered the market, investors can freely withdraw funds

The perpetrator itself opens a virtual platform, the funds are impossible to enter the market, and the establishment of the crime of fraud requires the perpetrator to have the purpose of illegal possession, so whether the investor can freely withdraw money determines whether it constitutes one of the key elements of the crime of fraud.

In some cases, if the investor wants to withdraw the money, he must first submit an oral/written application to the person in charge of the platform, and then withdraw the money after the review is passed, and Mr. Zhang believes that as long as the investor can withdraw the money, it cannot be considered that the perpetrator has the purpose of illegal possession.

Taking the criminal judgment issued by the Gaoping District People's Court of Nanchong City, Sichuan Province, as an example, in the case of Zhao xxx, Zheng xx, Zhang xx, etc., in this case, the investor's online recharge funds were transferred to the third-party payment platform of "Shanghai Fuyou Payment"; The offline recharge funds entered the private account opened by defendant Zhao X in the name of his father "Zhao X 5". If the customer needs to withdraw cash, he must first apply in the platform, and after Zhao Moumou's review, he can withdraw cash, and the court will convict and punish him for the crime of illegal business operation. There are many similar cases, and Mr. Zhang has handled several cases, and the common feature of such cases is that the funds do not enter the market.

Taking Yi X et al. '(2019) Anhui 06 Xing Zhong No. 22] as an example, Yi X et al. set up a virtual platform for profit, and there was a time difference between the platform data and international data, and the court held that the losses of the victims involved in the case were mainly high transaction fees, and when the victims invested, they knew that the platform transactions would produce high fees, overnight fees, spreads and other fees, and the trading behavior was operated and decided by the investors themselves, and there was no situation in which the platform concealed the high fees and caused the investors to have a wrong understanding. , the situation of defrauding investors of investment funds.

Therefore, in practice, when encountering such cases, Mr. Zhang believes that it is not necessary to dwell on the authenticity of the virtual platform, but to see whether the data of the virtual platform opened by the actor is consistent with the market (Mr. Zhang believes that the virtual platform and the real platform are not the criteria for judging, as long as the data is the same, it is not fraud), whether the background data can be modified, and whether the investor can freely withdraw money as the entry point, and submit a large number of precedents to advocate that the perpetrator established the crime of illegal business operation.

Fourth, according to the data market, the claim that the perpetrator does not constitute the crime of fraud

As mentioned above, it cannot be generalized that the perpetrator is a virtual platform, and in addition to the above views, Mr. Zhang believes that the electronic data existing in some cases can also confirm that the perpetrator does not constitute the crime of fraud (of course, some investigative organs will not collect data, or appraise the data, at this time, the defender needs to apply to the judicial organ for retrieval or application for appraisal).

The data of the virtual platform can directly reflect the deposit and withdrawal of the virtual platform, and whether the actor has ever modified the background data, because in some cases, although the actor has opened a virtual platform, there is no modification, and even if there is a situation of modifying the data, but some of the actors inside are not aware, then the uninformed such personnel subjectively do not meet the constituent elements of the crime of fraud, at this time it should be treated differently from the insider, and the actor who has no illegal possession purpose cannot be identified as a fraud crime.

In some cases, the amount of deposit and withdrawal reported by the investor is inconsistent with the platform, and there is no other evidence such as transfer vouchers to corroborate it, so it is necessary to determine it in accordance with the principle of benefiting the defendant when there is doubt.

In the case that Mr. Zhang had handled in which Mr. Zhang had been convicted of illegally operating a "virtual platform", the court held that "in this case, there is a situation in which the amount of deposited by the victim of the department is inconsistent with the amount of the transfer, where the amount of the deposit is greater than the amount of the transfer, and the amount of the transfer is determined as the amount of the victim's deposit; and if the amount of the self-reported amount is less than the amount of the transfer, because the victim thinks that the amount of the deposit is small, the amount of the victim's deposit is determined by the amount of the self-reported amount"; in some cases, the investor has stated that there has been a loss. But the platform shows that it is profitable, so the data at this time is very critical.

In the (2019) Yu Xing Zhong No. 50 ruling, the court made the following analysis of the defendant's act of opening a virtual platform: First, although the electronic trading system is a closed internal disk, the trading system is real, and the market data used comes from the real international data provided by Peng Mou Limited Partnership, Guizhou Poly Company and its member units do not enjoy information advantages in this data, can not predict and manipulate, and the existing evidence cannot prove that Guizhou Poly Company and its member units have manipulated data markets. The act of deceiving trading clients for profit. Second, the existing evidence cannot yet prove that Guizhou Poly Company has illegally profited through artificial chucks, slippage and other means in the operation of the trading platform. On the contrary, there is evidence that there are no restrictions on the platform except that the customer deposit and withdrawal are subject to bank regulations. The audit report also proves that after the customer deposits into the bank account of Guizhou Poly Company, the customer account forms a sub-account, and any third party cannot embezzle the funds in the customer's account. In the end, the court found that the crime of fraud was not established and sentenced to the crime of illegal business operation.

In summary, the perpetrator opens a virtual platform, using a false identity to give "reverse suggestions" to attract investors to deposit, earn fees and other fees, as long as the investor can freely enter and leave the gold, it cannot be identified as a fraud of "fabricating facts, concealing the truth, and having the purpose of illegal possession". Because, the analysis of the market "reverse suggestion" is the subjective judgment of the actor, rather than the result of the determination; although the funds have not entered the market, investors can freely withdraw and withdraw funds; although the actor opens a virtual platform, the trading rules are consistent with the market; although the data can be changed, but if the change is not the virtual disk invested by the investor, but other disks, just to make a profitable chart, issued to investors, to attract investment, then there is no modification of the data, this practice only conceals the facts, However, it does not prevent the investor from making his own choice; if the actor is not aware of the change of data, then it should also be treated differently from the person in the know, and the actor who does not have the purpose of illegal possession cannot be found to be a fraud crime; although the investor is ultimately losing money, but due to his frequent operation, the investor is aware of the fees and profit sharing fees for the liquidation rules and procedures, then there is no investor who falls into a misunderstanding, so it should not be convicted and punished for fraud.

Therefore, the perpetrator's opening of a virtual platform to make a profit is not the primary condition for the crime of fraud, but should be specifically analyzed according to the operation mode, and the perpetrator's existence of the above-mentioned circumstances is an illegal operation of securities, futures and insurance business without the approval of the relevant competent state departments, and should be determined as the crime of illegal business operation in accordance with article 225 of the Criminal Law.

Does the use of false identities by virtual platforms to give "reverse suggestions" to attract investors to deposit funds necessarily constitute the crime of fraud? —Research on Foreign Exchange Futures Crime (XVIII)

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