Case no. 2023-03-1-134-001: criminal judgement no. 26 of the fourth intermediate people's court of chongqing city (2017) and final decision no. 29 of the supreme people's court of chongqing (2019)
Briefing
After the establishment of a company, chen and wang conspired to design a five-tier marketing association programme in cases of unprofitable projects and heavy indebtedness. After paying the union's fees, the participants receive high returns and subsidies based on the number of downlines for development. The model spread rapidly, with over 300,000 participants and over $300 million in fees. Chen and wang split most of the money. The court of first instance sentenced chen to life imprisonment and wang to 15 years ' imprisonment for money-laundering. The sentence was upheld in second instance。
Elements of a decision
The offences of organizing, leading and marketing activities and pooling fraud are not mutually exclusive, and there may be competition. Fraudulent and illegal collection of funds for the purpose of illegal possession, using a distribution pattern, and constituting a dual offence, shall be punishable by the offence of fraudulent collection under the more severe penalty。
Focus of the controversy
1. Should chen, wang, or wang, be guilty of organizing, leading and selling activities, or of fund-raising fraud? 2. How does judicial practice choose to apply when an act is committed in multiple offences
Trial opinions
The court pierced the coat of “sales”, pointing directly to the core: the purpose of the act. In the present case, the distribution is merely a means and form, and the kernel is a “fake”. While knowing that the company is not profitable, chen and wang have designed models that are one and a half times more profitable in the short term and are doomed to collapse, and have illegally appropriated huge sums of money. This chain of conduct is clear evidence of its subjective “illegal possession”. Thus, their conduct is formally consistent with the offence of organizing, leading and selling activities, and in substance more in line with the composition of the offence of fraud, which is punishable as a felony (fraud) based on the principle of “one-size-fits-all”。
[depth resolution]
This case, like a mirror, has many of the high-return projects' cores. As a lawyer, what we see is not just the two accused's imprisonment, but the precision of the logic of justice on similar economic crimes and the profound warning it leaves to the public and investors。
Why fund-raising, not simple marketing? The key is a penetrating review of “purpose” and “outcome”. The crime of organizing and leading a distributional activity strikes at the economic and social order itself, the composition of which does not necessarily require the organizer to have an illegal occupation purpose (although it is common practice). The core element of the crime of financial fraud, on the other hand, is “explicit possession”. In the present case, the court did not stop at the appearance of a distribution pattern of “heading, payment of contributions, recovery of grade”, but examined in depth the flow of funds: over $300 million was collected, with a very small portion (approximately $7. 16 million) being used for so-called “operations” and more than half (170 million) for the return of “dismantling the east wall to supplement the west wall” in order to sustain the fraud, while a huge sum of up to $160 million was directly divided between the two. This “white wolf with empty gloves”, “new and old” and, ultimately, a pattern of large sums of money that fit perfectly into the recognition of “illegal possession” in the offence of fraud. The court's judgement clearly tells us that, no matter how complex the packaging may be, as long as the kernel is “guilty for itself”, there is no impunity for serious crimes。
"pass-proofing" guidelines for ordinary people and post-pumping strategy
This case has a distinct inspiration for potential investors and participants。
For ordinary people (risk prevention):
For participants (after-action relief):
Extended thinking: if the funds were used in part to operate, would they still be pooled fraud? This is a common defence point in practice. Is it assumed that part of the funds that chen will retain is invested in a real, but lost, project in the company? The answer may be the complexity of influencing judgement, but not necessarily the characterization. The courts will still examine in a comprehensive manner: what is the proportion of the total amount of illegal funds that goes into operation? Is it mainly to sustain “demonstrating” expenditures in front of a scam, or is it a real rational investment in business? Investing in high-risk and even fictional projects, knowing that the company is unaffordable and unsustainable, remains essentially a way of disposing of the property of others and cannot automatically negate their illegal occupation. The core remains whether the whole act is deceptive and illegal。
#bringing money and fraud #
