Organizing and leading pyramid schemes
1. Legal provisions
Paragraph 2 of Article 224 of the Criminal Law stipulates that where an organization or leader requires participants to obtain membership qualifications by paying fees or purchasing goods or services in the name of business activities such as selling goods or providing services, and forms hierarchies in a certain order, and directly or indirectly uses the number of recruits as the basis for remuneration or rebates, induces or coerces participants to continue to recruit others to participate, defrauds property, or disrupts the economic and social order, he shall be sentenced to up to five years imprisonment or short-term detention and shall also be fined; where the circumstances are serious, a sentence of five or more years imprisonment and a concurrent fine is to be given.
2. Interpretation of Provisions
This article is about the crime of organizing and leading pyramid selling activities and its criminal punishment. The so-called crime of organizing or leading pyramid selling activities refers to the conduct of organizing or leading pyramid marketing activities in the name of business activities such as selling goods or providing services, requiring participants to pay fees or purchase goods or services to obtain membership qualifications, and forming hierarchies in a certain order, directly or indirectly using the number of recruits as the basis for remuneration or rebates, to induce or coerce participants to continue to recruit others to participate, to defraud property, and disrupt the economic and social order. The constituent elements of this crime are as follows:
1) From the objective point of view of this crime:
The subject of this crime is a general subject, and any natural person who has reached the legal age of criminal responsibility and has the capacity for criminal responsibility can constitute this crime. According to the provisions of the judicial interpretation, this crime only punishes the organizers and leaders of pyramid schemes, and the criminal law does not provide for the punishment of occasional participants.
According to article 2 of the "Opinions of the Supreme People's Court, the Supreme People's Procuratorate and the Ministry of Public Security on Several Issues Concerning the Application of Law in Handling Criminal Cases of Organizing and Leading Pyramid Selling Activities", the following persons may be designated as organizers and leaders of pyramid selling activities: (1) Persons who play a role in initiating, planning, or manipulating pyramid selling activities;(2) Personnel who are responsible for management and coordination in MLM activities;(3) Personnel who are responsible for publicity, training, etc. in MLM activities;(4) Those who have received criminal punishment for organizing or leading pyramid marketing activities, or who have received administrative punishment for organizing or leading pyramid sales activities within one year, and who have directly or indirectly developed more than 15 persons and a level of ** or above;(5) Other personnel who play a key role in the implementation of MLM activities and the establishment and expansion of MLM organizations. Where the crime of organizing or leading pyramid selling activities is carried out in the name of a unit, criminal responsibility is generally not pursued for personnel who are appointed by the unit to engage in labor work only.
The harmful conduct and harmful results of this crime are manifested in the conduct of organizing or leading pyramid marketing activities in which participants are required to pay fees or purchase goods or services to obtain membership qualifications in the name of business activities such as selling goods or providing services, and forming hierarchies in a certain order, directly or indirectly using the number of recruits as the basis for remuneration or rebates, to induce or coerce participants to continue to recruit others to participate, to defraud property, and disrupt the economic and social order.
b) The crime is subjective:
The subjective aspect of this crime is direct intent, that is, knowing that one's act is an act of organizing and leading a pyramid scheme, but still carrying it out, and requiring that the purpose be to obtain property by fraud. Negligence does not constitute this crime.
3. Criteria for filing a case
According to Article 78 of the "Provisions of the Supreme People's Procuratorate and the Ministry of Public Security on the Standards for Filing and Prosecution of Criminal Cases under the Jurisdiction of Public Security Organs (II)", it is stipulated that in the name of business activities such as promoting goods and providing services, organizing and leading participants to pay fees or purchase goods and services to obtain membership qualifications, and form hierarchies in a certain order, directly or indirectly using the number of development personnel as the basis for remuneration or rebates, inducing, Where participants are coerced to continue to develop others to participate, defraud property, or disrupt economic and social order, and where there are more than 30 people suspected of organizing or leading pyramid marketing activities and the level is above **, the organizers and leaders shall be prosecuted.
The organizers and leaders of pyramid selling activities referred to in this article refer to the initiators, decision-makers, and manipulators who play an organizational and leading role in pyramid selling activities, as well as those who have important responsibilities such as planning, commanding, arranging, and coordinating in pyramid selling activities, or who play a key role in the implementation of pyramid selling activities.
Fourth, risk prevention
Pyramid schemes were once rampant in China, causing tremendous harm to the personal and property rights and interests of the masses. This crime was created precisely to combat pyramid schemes. Generally speaking, for normal companies and enterprises, as long as they operate in accordance with the law, they will not be guilty of this crime. However, this does not mean that this crime does not happen for companies and businesses. The prevention of this crime can be carried out in the following ways:
1) Strengthen the study and Xi of laws and regulations.
Companies and enterprises should strengthen their Xi of laws and regulations, understand the existence and operation mode of MLM organizations, and avoid these illegal methods in their own operations.
2) Establish a legal business model.
When companies and enterprises explore business models, they should be based on the law and within the framework of the law. Explore and establish a good business model in accordance with the law, and must not require participants to pay fees or purchase goods or services to obtain membership qualifications, must not form hierarchies in a certain order, directly or indirectly use the number of development personnel as the basis for remuneration or rebates, and must not induce or coerce participants to continue to develop others to participate in the business model.
3) The business model promoted by others should be carefully screened and should withstand the interests of others.
For pyramid marketing activities, companies and enterprises should always be vigilant, establish a legal risk prevention mechanism, prevent pyramid marketing organizations from infiltrating companies and enterprises in the form of cooperation, franchise, etc., so that enterprises inadvertently become the best pyramid marketing organizations, and for business cooperation, there should be a professional legal team to predict the risk, so as to avoid the risk of committing this crime.
5. Case analysis
1) Case introduction.
The People's Procuratorate of Hejiang County, Sichuan Province alleged: In September 2016, the defendant Xie Xiaohua was introduced to join the "Shanxinhui" through Tang Xiaorong, a member of Shenzhen Shanxinhui Cultural Communication*** hereinafter referred to as "Shanxinhui") (handled in a separate case), with a registered account of xia and an ID of 119433, which belonged to the owner of B**. Thereafter, in the name of "poverty alleviation and symbiosis of equal wealth", defendant Xie Xiaohua relied on "Benevolence Hui"** to actively organize, lead and publicize the "Benevolence Hui" organization, using high static income and dynamic income as bait to obtain bonuses by developing downline membership levels, and luring participants to continue to recruit other personnel to participate. As of the time of the case, the defendant Xie Xiaohua had developed a total of 83 downline members, with 3 levels, and obtained 6,380 yuan in illegal gains.
Defendant Xie Xiaohua objected to both the facts of the crime and the charges, arguing that his conduct did not constitute a crime. Defendant Xie Xiaohua defended that she did not recognize the fact that there were 83 downline members alleged by the public prosecution, saying that some of the accounts of downline members in the network were not activated, and if they were not activated, they were not used, and should not be counted as downline members who developed themselvesThe accounts of my husband and other relatives are developed by themselves, and some people lend money to others to operate, and the income is also obtained by others, and they have never tricked others into participating. I joined Shanxin Hui because I saw reports on the legal system and other mainstreams, and without these reports, I wouldn't have gone to the bank to take out a loan, borrowed money from friends, and thought I was doing a good deed. The illegal gains alleged by the public prosecution are also not recognized. He was also a victim and a participant in the whole incident.
After the trial, the court held that the "Kindness Hui" member management platform, in the name of "poverty alleviation and relief, kindness and kindness", uses high static income and dynamic income as bait to develop downline members, requires participants to pay fees to obtain membership qualifications, forms tiers in a certain order, and obtains corresponding benefits according to the amount and number of donations of the developed members, and the income** Relying on the completion of gifts between members, there is no capital appreciation channel in the inter-member flow system, and it can only rely on the capital entry of later members to support the profits of early members, which is a pyramid marketing organization. On the issue of whether defendant Xie Xiaohua's conduct can be found to be the crime of organizing and leading pyramid selling activities, according to article 1 of the "Opinions of the Supreme People's Court, the Supreme People's Procuratorate, and the Ministry of Public Security on Several Issues Concerning the Application of Law in Handling Criminal Cases of Organizing and Leading Pyramid Selling Activities", the provisions on the number of people at the level of a pyramid selling organization are that there should be more than 30 people participating in pyramid selling activities within the organization and the level should be at ** level or above. In this case, the rapid spread of the Benevolence Organization through the Internet and WeChat is a new type of cybercrime that is harmful to society, but the personnel of the organization leaders cannot be identified by the membership and level in the network data. Defendant Xie Xiaohua participated in the Benevolence Exchange and tried to profit through dynamic and static means. However, from the analysis of the available evidence, the judicial appraisal opinion of the Hunan Provincial Jianzhen Judicial Appraisal Center stated that there were 3 layers of subordinate networks and 83 member accounts, and that the number of people in the public security organ's investigation records had not yet reached the quorum, and some of the personnel stated that their accounts were operated by the defendant Xie Xiaohua himself, and the witness testimony also showed that there was a possibility that one person operated other multi-person accounts and some member accounts that were not activated and unused, and that some of the family member accounts developed by the downline members were operated by the development personnel themselves, and from the available evidence, the defendant Xie Xiaohua had a small number of developers, so the court held that the circumstances of the defendant Xie Xiaohua were significantly minor and the harm was not great, not considered a crime. Accordingly, the court acquitted the defendant Xie Xiaohua.
2) Brief commentary.
The defendant in this case was acquitted because the court found that the circumstances of his crime were minor and the harm was not greatAt the same time, judging from the available evidence, the court could not accurately determine the number of people who were downline. Therefore, the court finally acquitted him. In the commercial society, all kinds of sales methods emerge in an endless stream, no matter how the products are sold, as an enterprise, we must pay attention not to pay fees or purchase goods, services and other ways to obtain the qualification to join, and in a certain order to form a hierarchy, directly or indirectly to the number of development personnel as the basis for remuneration or rebates as the business model, this model may completely lead to the criminal risk of this crime. The defendant in this case believed some advertisements in online newspapers and magazines, and did not seriously screen whether such advertisements were legal, which led to his own criminal risk. Therefore, as a sales company, you should understand some basic laws and regulations, and only in this way can you keep yourself away from criminal risks to a greater extent.