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Xiao Sa: The crime of pyramid schemes led by organizations with the highest incidence of encrypted assets



Sister Sa’s team collected more than 2,000 public verdicts in criminal cases involving currency, among which 409 were crimes of organizing and leading pyramid schemes, accounting for the highest proportion. This crime frequently appears in the currency circle, and it is a crime that the police are very concerned about. Today we will talk about the crime of organizing and leading pyramid schemes, one of Article 224 of the Criminal Law. Study together with everyone to clarify the boundaries of behavior, reduce the occurrence of cases, and save judicial resources.

Not all MLM activities are criminal

According to the "Opinions on Several Issues Concerning the Application of Law in the Handling of Criminal Cases of Organized and Leading Pyramid Marketing Activities" issued by the two high schools and the Ministry of Public Security in November 2013, "team compensation" for the purpose of selling goods and based on sales performance, even if it conforms to the The requirements for 30 people in the third level, but it cannot be treated as a crime. However, for products sold on the surface, pyramid selling activities that essentially "use the number of development personnel as the basis for remuneration or rebates" should be convicted and punished under Article 224 of the Criminal Law.

Xiao Sa: Investors in the currency circle should reduce fluke psychology and fully understand investment projects and operating mechanisms: Xiao Sa, director of the Bank of China Law Research Association, pointed out from a legal point of view that at present, different types of funds have various models and routines, and they need to be discarded. Look at the actual legal relationship from the appearance. In her view, with different fund models, investors and operators are in different legal relationships, and thus face different legal risks, including but not limited to general property losses, encountering fraud, and pyramid scheme activities. Therefore, investors in the currency circle are advised to reduce fluke psychology, fully understand investment projects and project operation mechanisms, understand legal common sense, and seek professional help in a timely manner. (Beijing Business Daily) [2020/6/9]

In other words, the "qualitative change" difference between crime and innocence does not lie in the superficial method of team compensation, but in whether the purpose is not to sell goods, but to defraud "entry fees" by "pulling people".

Voice | Xiao Sa: The end of the year is approaching, and the crackdown on local small and medium-sized currency-related exchanges may be the "first choice": news on November 18. Regarding Shanghai’s investigation and rectification of virtual currency exchanges, Xiao Sa, director of the China Banking Law Research Association, pointed out in an interview that from the experience of handling cases, the year-end is a "time node" that law enforcement agencies in various provinces and cities are very concerned about. , It is also reasonable to conduct investigations on virtual currency exchanges and surrounding industries within the jurisdiction. In the current round of clean-up and rectification actions, the focus of the crackdown is expected to focus on crimes such as fund-raising fraud and illegal business operations. The crackdown on local small and medium-sized currency-related exchanges may be the "first choice." [2019/11/18]

In similar cases in the currency circle, we encountered more difficult problems. First of all, we need to solve whether a certain token sold is a virtual commodity, whether it has property attributes, or is it just a criminal prop; For "mining", the reward method is not necessarily direct return of coins, but may be to accelerate the progress of successful mining. Whether this will affect the nature of the case is worth exploring.

Voice | Xiao Sa: The development of blockchain and other industries will inevitably bring more legal challenges: According to news from the financial industry, lawyer Xiao Sa wrote that the development of big data and blockchain industries will inevitably bring more legal challenges. At the moment when the infrastructure has not been fully constructed, it is indeed possible to accidentally step into the criminal circle. It is necessary to have basic knowledge of the crime of illegal business operations, the crime of issuing stocks and bonds without authorization, and the crime of illegally absorbing public deposits. [2018/10/29]

In 2013, the legal characterization of BTC was already clear, that is, Bitcoin is a special virtual commodity, that is to say, if Bitcoin mining is carried out in a team-based way, it is difficult to define it as a crime of organizing and leading pyramid schemes under Chinese law; but For other currencies, non-mainstream currencies that have not yet entered the exchange have no fair price, and the applicable population is narrow. It is likely to be characterized as a criminal tool, thereby leading organizers and leaders into the criminal circle; for ETH, Sister Sa's personal preference It is necessary to classify it into the same category as BTC; but for Dogecoin and its like, it may be considered as a criminal tool similar to non-mainstream currencies.

Voice | Xiao Sa: China's blockchain information service management regulations are expected to be implemented by the end of the year: According to, regarding the "Blockchain Information Service Management Regulations (Draft for Comment)" announced by the State Cyberspace Administration of China Xiao Sa, director of the association, said: "The time for solicitation given this time is relatively short, which shows that the market is strong and the regulators are in an urgent mood. It should be released soon, and it is expected to be implemented before the end of the year." Different from the initial stage of online lending and other industries, blockchain The chain industry began to pay attention to "administrative punishment" in the early stage of supervision. The opinion draft mentioned that "if a crime is constituted, criminal responsibility shall be investigated according to law", which also shows the attitude of the regulatory agency: offenders may be punished. This regulation implements a filing system for blockchain information service providers and requires annual review. For violations such as producing, publishing, and disseminating information prohibited by laws and regulations, the regulations clarify the accountability of warnings, fines, and even ordering to suspend services. [2018/10/20]

The difficulty is that the way of rebate is not to give coins directly, but to give a right of acceleration. If this acceleration is difficult to convert into property, it constitutes one of the 224 criminal law and there is a legal obstacle. In theory, we can compare the "accompanying female service" in corruption and bribery cases to property interests, but in judicial practice, we must strictly abide by the principle of legally prescribed crimes and punishments, prohibit analogous explanations, and exclude the right to accelerate from the "remuneration" of the crime of organizing and leading pyramid selling activities. " and "rebate".

According to the judicial interpretation, the organizers and leaders of MLM activities fabricate and distort national policies, fabricate and exaggerate business, investment, service items and profit prospects, cover up the real source of remuneration, rebates or other fraudulent means, and implement Article 224 of the Criminal Law. According to the provisions of the Act, those who illegally gain profits from the fees paid by those participating in the pyramid scheme activities or the fees for purchasing goods and services shall be deemed as "fraudulently obtaining property".

The first thing to pay attention to is: whether the participants in the pyramid sale feel that they have been cheated or not, it does not affect the determination of "defrauding property".

Secondly, defrauding property is not empty, but from the perspective of the pyramid structure of pyramid schemes. If you want to maintain the survival of the pyramid scheme organization, you must find the next big guy who beats the drums and spreads flowers. According to the calculation of compound interest, soon there will not be enough people in the world to develop MLM organizations offline. Therefore, it is inevitable to fail to maintain the survival of MLM organizations through the development of downlines to pull people's heads. Organizers and leaders are well aware of this, and continue to promise rewards and take away entry fees from others. This is defrauding property.

However, the case in the currency circle is slightly different. If the organizer does not promise a return to the participants, and the participants know that there is no definite return, but just to get tokens and go to the exchange to gamble for income, the participants will make money and lose money. If the exchange trades profitably, then things may change. According to Sister Sa’s understanding, it is an open secret that the project party signed a drawer agreement with the exchange to find a quantitative team to “support the market”. If the organizer has not colluded with the exchange, and the virtual currency is doubled due to its own "deflation" or scarcity, the organizer cannot be blamed, at least not convicted and punished according to the crime of organizing and leading pyramid schemes.

Criminal cases involving encrypted assets with legal currency (including foreign legal currency) often have the problem of "imaginative coincidence" between the crime of organizing and leading pyramid schemes and the crime of fund-raising fraud, that is to say: one act has violated two crimes. According to the basic handling principles of the criminal law, imaginary concurrence is punished as a felony.

Looking at the articles of law, we can clearly see that Article 192 of the Criminal Law is a more serious crime of fund-raising fraud (the crime was still punishable by death until Article 199 of the Criminal Law was abolished later), that is to say, if the currency circle case involves legal currency, it should be characterized in large numbers For the crime of fund-raising fraud, instead of 409 cases, it was finally judged as the crime of organization-leading pyramid schemes.

In my opinion, there are three reasons: first, the legal nature of encrypted assets and digital tokens is uncertain, and I don’t know whether they need to be protected in accordance with property legal interests; second, there is a judicial point of view that extends from intellectual property crimes, that is, insufficient possession by others In order to completely destroy the owner's rights, but obviously the private key is king in the encryption industry, this traditional intellectual property crime theory cannot be applied; third, it is very difficult for judicial appraisal institutions to price encrypted assets, and the cases that Ms. Sa has undertaken and contacted Among them, there is a precedent for pricing encrypted assets according to the average price of the three mainstream exchanges at the time of the behavior, but more judicial appraisal institutions are worried that the currency price will be unstable and affect their credibility, so they refuse to conduct appraisals, resulting in no criminal amount, and can only rule out fund-raising fraud crime, convicted and punished with the crime of organizing and leading pyramid selling activities.

There are also rumors on the market about the crime of organizing and leading pyramid schemes, confiscating corresponding encrypted asset appreciation, etc. To be honest, it is not a good job to take over a bunch of "thunders" who do not know when they have skyrocketed and plummeted, not to mention a certain incident in the Sichuan chain. Case-handling agencies in various places are still very cautious.


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