The distinction between pyramid scheme crimes and illegal fund-raising crimes [Main Points of the Judgment] In the name of "equity crowdfunding" and "debt crowdfunding", the implementation of pulling heads, building a hierarchy and rebates on entry fees step by step to develop shareholders

The distinction between the crime of pyramid scheme and the crime of illegal fund-raising

　　【Main Points of the Judgment】In the name of "equity crowdfunding" and "debt crowdfunding", the implementation of pulling heads, building a hierarchy and rebate on the entry fee step by step, in the name of developing shareholders, the participants are immediately crowned as shareholders or salesmen after paying the pyramid scheme fee, and obtain the qualification to continue to recommend shareholders or carry out financial investment, in order to carry out pyramid schemes and illegally absorb public deposits criminal activities. Where the defendant organizes or leads pyramid schemes and illegally absorbs deposits from the public, and meets the criteria of serious circumstances or huge amounts, he shall be punished for several crimes in accordance with law for the crime of organizing or leading pyramid schemes or the crime of illegally absorbing deposits from the public.

　　【Case Number】First Instance: (2016) Jing 0101 Xing Chu No. 144 Second Instance: (2017) Jing 02 Xing Zhong No. 349

　　【Facts】Between March and May 2015, defendant Zhang Chunpu, together with Zhang Luyang, Zhao Yun and others, used media, leaflets, promotion meetings and other forms to publicize the "Huaqiang Coin" project in Rooms 10623 and 10625, Block A, Galaxy SOHO Building, and carried out the following acts: 1. In the name of "equity crowdfunding", the defendant Zhang Chunpu, together with Zhang Luyang, Zhao Yun and others, used the media, leaflets, promotion meetings and other forms to publicize the "Huaqiang Coin" project in RoomS10623 and 10625, and carried out the following acts: 1. In the name of "equity crowdfunding", the participants were required to pay 10,000 yuan to obtain shareholder qualifications, and required the participants to continue to develop the downline, and to use the number and level of personnel in the development of the downline as the basis for rebates As of the time of the case, the number of people participating in the "equity crowdfunding" has reached more than 400 people, and more than 3 levels have been formed, and the total amount of MLM funds paid has reached more than 4 million yuan; 2. In the name of "debt crowdfunding", it has been publicly publicized to the public, promising to repay the principal and interest within a certain period of time, and signing agreements with customers to absorb a total of more than 3 million yuan of public funds.

　　【Trial】The Dongcheng District Court of Beijing sentenced Zhang Chunpu to 9 years and 6 months imprisonment and a fine of 500,000 yuan for organizing and leading pyramid schemes and illegally absorbing deposits from the public for organizing and leading pyramid schemes and illegally absorbing deposits from the public for organizing and leading pyramid schemes, in accordance with article 224-1, article 26, paragraphs 1, and 4, article 26, article 27, article 52, article 53, article 61, article 64, and article 69, paragraphs 1 and 3, respectively, for organizing and leading pyramid schemes and illegally absorbing deposits from the public. He was also fined 250,000 yuan; Zhao Yun was sentenced to 4 years' imprisonment and fined 250,000 yuan. At the same time, the illegal gains of the crime of illegally absorbing deposits from the public in the case were recovered and returned to the investors.

　　【Comment】During the trial of this case, defendant Zhang Chunpu repeatedly argued that he was engaged in normal corporate publicity and financing behavior, and even if there were problems such as lack of qualifications and poor management, the violation was also relevant administrative regulations and did not constitute a crime. The boundaries between legal financing behaviors such as equity crowdfunding and the issuance of corporate bonds and the crimes of organizing and leading pyramid schemes and illegally absorbing deposits from the public have become the focus of dispute in this case.

I. Whether the "debt crowdfunding" model in this case constitutes the crime of illegally absorbing deposits from the public

The term "debt crowdfunding" is not found in the expression of official documents, and it is generally understood by the private sector as a lending act of repaying principal and interest when due. Defendant Zhang Chunpu was the actual controller of Jinpingbao Company, and he believed that the issuance of corporate bonds was a legal financing act. The Company Law, the Securities Law, the Regulations on the Administration of Enterprise Bonds and other laws and administrative regulations have clear provisions on the qualifications, conditions, procedures, scale, etc. of the company's issuance of bonds, such as continuous profits in the three years before the issuance of corporate bonds, the issuance of securities to unspecified targets or the issuance of securities to specific targets more than 200 people are public offerings, and must be reported to the securities regulatory authority under the State Council or the department authorized by the State Council for approval in accordance with the law, etc. Zhang Chunpu's behavior obviously violates the above laws and administrative regulations. However, in determining whether his conduct constitutes a crime, he shall strictly follow the principle of criminal law and grasp the essence and objective characteristics of the crime of illegally absorbing deposits from the public. Relying on a newly registered Jinpingbao company whose business scope is technology development, technical consultation, technical services, technology promotion, computer technology training, etc., Zhang Chunpu et al. openly and falsely publicized to the unspecified public through online video interviews, newspaper reports, and regular lectures without approval, and absorbed public deposits by means of creditor's rights and financial management that promised high interest rates, and their behavior fully met the constituent elements of the crime of illegally absorbing deposits from the public.

　　Second, the core of MLM under the cover of the "equity crowdfunding" model in this case

　　The crime of organizing and leading pyramid schemes is a new crime added to the Criminal Law Amendment (VII), and the payment of entry fees and the use of the number of people (commonly known as "pulling people's heads") as the basis for rebates can be regarded as the main characteristics of the crime of pyramid schemes, and the nature and purpose of the crime is to defraud property. The high remuneration and high rebate promised by the MLM come from the entry fee paid by the new development personnel. In this way, a pyramid-like hierarchical relationship is formed in the MLM organization, and once it is impossible to develop new members, the door fee paid at the bottom of the pyramid will sink into the sea.

　　In this case, Zhang Chunpu argued that he had not promoted goods or provided services, that he had become a true shareholder of the company after payment, and that his "equity crowdfunding" model did not constitute the crime of organizing and leading pyramid schemes. Then the characterization of this case should be unveiled to analyze and determine its essence. After investigation, the fundamental nature of its so-called "equity crowdfunding" is to require participants to pay an entry fee of 10,000 yuan to obtain the qualification to recommend shareholders, so as to continue to develop the downline, form a hierarchy, and directly use the number and level of development personnel as the basis for rebates to defraud money. As for the participants after paying the 10,000 yuan entrance fee, they only nominally become shareholders or salesmen of the company, while the so-called shareholders do not hold the company's shares in the legal sense, have no corresponding rights and obligations, and do not actually participate in operation and management; the so-called salesmen have no normal business except for the participation of new people. Therefore, this case is only a kind of Internet pyramid scheme cloaked in the guise of equity crowdfunding, circumventing the law under the banner of developing shareholders, and directly using the funds collected by "equity crowdfunding" to draw commissions.

　　In summary, the "equity crowdfunding" and "debt crowdfunding" carried out by Zhang Chunpu and others are not legal financing acts of enterprises, which constitute the crime of organizing and leading pyramid schemes and illegally absorbing deposits from the public, respectively, and shall be punished for several crimes in accordance with law.