On December 26, 2023, the Supreme People's Procuratorate and the Supreme People's Court jointly released typical cases of strictly cracking down on private placement crimes in accordance with the law. Among them, the case of Su and others who covered up the illegal absorption of public deposits in the form of private equity legal operation handled by the Futian District Procuratorate of Shenzhen City, Guangdong Province was selected among them.
At that time, the cases involving private equity ** were completely new fields for the public and the procuratorate, and there was no precedent to follow. In this case, some of the private equity firms have been filed in advance in accordance with the regulations, and the funds raised are all invested in real projects, so how to determine criminal illegality has become the main challenge we face. Although several years have passed, Yang Tingting, a first-level prosecutor of the Futian District Procuratorate, still clearly remembers the confusion when she first took over the case in February 2019.
In order to make up for the shortcomings of private equity expertise, the Futian District Procuratorate set up a case handling team to carefully study and study the policies, laws and regulations related to private placement, closely follow the two basic attributes of private placement** "non-public" and "raising from specific qualified investors", look for clues from investor information and capital flow, and finally determine the "penetrating" four-step review strategy.
This case has promoted the procuratorial organs' cutting-edge exploration and procuratorial practice of illegal and criminal acts involving private placement, and provided reference value for the handling of subsequent similar cases in terms of evidence review standards, conviction and sentencing. Yang Tingting introduced that the private placement in Futian District occupies half of Shenzhen, and it is of great significance to accurately crack down on the illegal crimes behind the private placement case, which is of great significance to prevent and resolve financial risks in the jurisdiction, protect the legitimate interests of investors, and promote the healthy development of the business environment in the jurisdiction.
How do retirees become private equity investors?
Step 1: Penetrate the mask of "private placement" and reverse confirm the openness, sociality and inducement of fundraising
In February 2019, the Futian Branch of the Shenzhen Municipal Public Security Bureau filed and investigated the case of Su's illegal absorption of public deposits. According to the report materials of a number of investors, Su used the wealth management of Hong, which he actually controlled, as a private equity manager, and successively established 5 partnerships to issue private equity products (4 of which were filed with the ** industry association) to invest in a number of real estate development projects. In the process of raising funds, Su did not invest the funds raised and absorbed into the agreed project, but misappropriated them for other purposes, and by the time of the case, the funds that could not be redeemed amounted to hundreds of millions of yuan.
For the profit they promised, I invested my family's savings for many years in this private placement**, as well as the money that my daughters pooled together. "There are a total of 174 registered investors in the case, and Grandma Liu, who is over eighty years old, is the oldest among them.
Is there a mistake in the qualification review of the private equity firm? Or did someone do it on purpose? In the stage of early intervention in accordance with the law, Grandma Liu has become an important entry point for prosecutors to guide investigators to carry out "penetrating" review.
Using "age" as the keyword, the investigators conducted a comprehensive investigation of the identity information of other investors involved in the case, and soon found that retirees over eighty years old like Grandma Liu were not alone. Then check the information along the investment channels of this group of people**, and find that they mostly obtain fundraising information by word of mouth and acquaintance sales.
The prosecutor deduced the relationship between the characters involved in the case in detail, and dug deep into the clues of the pursuit and prosecution.
In the interlocking investigation and tracing of the origin, all aspects of the fundraising of the private equity institutions involved in the case were gradually penetrated, and the evidence was continuously excavated and fixed, and by the time of the review and arrest stage in May 2019, the essence of the illegal fundraising of the private equity institutions involved in the case had been fully exposed.
According to the regulations, private equity platforms have clear requirements on the method of fundraising publicity, investor qualification review, and investment amount standards. Yang Tingting introduced that the existing evidence basically confirmed that the fundraising object involved in the case had seriously violated the basic requirements of private placement ** non-public and specific qualified investors. The private equity institutions involved in the case only cared about the amount raised by the investors, but did not conduct a qualification review of the investors, and a considerable number of investors, like Grandma Liu, could neither meet the statutory minimum in terms of personal financial assets or average annual personal income, nor did they have the statutory ability to identify and bear risks.
In addition, the prosecutor also found that there were 97 individual investors in a private placement product involved in the case controlled by Su, and the law stipulates that the total number of partnership investors and **type investors in a single private placement ** investor shall not exceed 50. In order to attract funds, the ** manager involved in the case even allowed unqualified investors to form a group to adopt the "spelling order**" expressly prohibited by law
When the investor has doubts about the benefits of the project, the affiliated company actually controlled by Su will put on the "confidence superimposed weight" again, and sign a repurchase agreement with the investor with the expected profit as the lure, and Su will provide unlimited joint and several liability guarantee, agreeing on an annual interest rate of 10% to 145% return, commitment to repay principal and interest or pay return. Based on this, the procuratorate determined that the so-called "private" fundraising in the case was actually a "public" fundraising.
Can registration and filing ensure the legality of subsequent acts?
Step 2: Penetrate the legal camouflage and strictly control the flow of funds and accurately convict them
These private placements are all recorded, and our projects are real. "After Su arrived at the case, although he truthfully confessed the ins and outs of the private placement involved in the case, he repeatedly emphasized that he had fulfilled the legal procedures, and the case only occurred because of the rupture of the capital chain, and his behavior was only misappropriation of funds.
Yang Tingting said that the procuratorial organs have actively communicated with the audit institutions from the early stage of early intervention to jointly study and determine the focus and direction of the fund audit. With the in-depth development of the audit work and the continuous improvement of the evidence, the facts of the case gradually became clear at the stage of review and prosecution.
In the preparatory stage, Su gradually carried out the establishment of ** manager, ** product layout, and selection of investment projects in strict accordance with legal procedures, and the private ** products issued were also applied and registered with ** industry associations in accordance with regulations. However, according to the relevant laws and regulations, the open absorption of deposits to unspecified members of the public is the exclusive business of commercial banks, which must be approved by the banking regulatory authority. "The affiliated company controlled by Su violated the rules by publicly offering and selling private placements to unspecified members of the public, regardless of whether it was registered and filed by the ** industry association, it does not belong to absorbing funds from the public with the permission of the relevant departments in accordance with the law. Yang Tingting said that the many efforts she made in the early stage for legal operation were actually a "cloak" carefully woven to cover up the fact of illegally absorbing public deposits, and did not have the premise of the legality of the crime of misappropriation of funds.
The procurator and assistant carefully sorted out the direction of the funds involved in the case one by one.
After analysis, the procuratorate believes that Su broke through the "private" nature of private placement and the bottom line of private equity investment risk, violated the law to open the development of unqualified investors to the public, and carefully set up "superimposed" commitment guarantees such as repayment of principal and interest and repurchase for investors, and the unpaid funds were about 4More than 4.1 billion yuan is an illegal fund-raising in an open, social, and inducing manner, disrupting the financial order, and the amount is huge, and criminal responsibility should be pursued for the crime of illegally absorbing public deposits.
On March 11, 2020, the Futian District Procuratorate prosecuted Su on suspicion of illegally absorbing public deposits in accordance with the law. During the review for prosecution stage, Su pleaded guilty and accepted punishment.
How to determine the scope of criminal suspects?
Step 3: Penetrate the list of responsibilities and successfully prosecute two key personnel
At the stage of approving the arrest, the procuratorate also found that the personnel of the private ** sales channel designated by the investors were different, which not only confirmed the openness of the information release channels, but also posed a difficult problem to the prosecutor in terms of whether all the relevant personnel involved in the case were held accountable in accordance with the law.
In this case, the composition of the main personnel of the private equity institution involved in the case was complex, and it was often accompanied by a mixed situation, among which the core management personnel, publicity and promotion personnel, sales personnel, and responsible personnel may all become accomplices to the crime of illegally absorbing deposits from the public. Yang Tingting further explained that the platform boss and senior management argued that they did not have direct contact with investors, and could not know and control the sales staff to advertise and raise funds from unqualified investors in violation of regulations; The design, R&D, publicity and promotion personnel of some first-class products also argued that they only designed and promoted the products for the record, and did not understand the operation mode of the platform.
Therefore, the procurator handling the case closely followed the main responsibilities of the persons involved in the case in the act of illegally absorbing public deposits, and after careful analysis and judgment when the investigating organ only transferred Su for prosecution, it was found that Gao and He of the private equity institutions involved in the case both played an important role in the sale of products in the crime of illegally absorbing public deposits, and should be found to be key personnel. The procuratorate immediately guided the investigating agency to pursue and prosecute the two men in accordance with the law.
On April 21, 2020, after Gao and He arrived at the case, they initially refused to admit guilt, arguing that they were only acting on the instructions of the main culprit. In the face of detailed evidence, on December 16, the two finally pleaded guilty and accepted punishment in court. For other salesmen and ordinary staff involved in the case, the procuratorial organs fully implement the criminal policy of blending leniency and severity.
How to effectively safeguard the legitimate rights and interests of investors?
Step 4: Penetrate the pressure of petitions, effectively save losses, and demonstrate the feelings of the procuratorate for the people
In practice, the recovery of stolen goods and losses is a "perennial difficulty" in handling illegal fundraising cases, and it is often faced with problems such as the lack of recovery of stolen goods and the difficulty in enforcing judgments. In this case, there were many private equity investors involved in the case, and the amount involved was large, so it became a key petition case in the early stage of case filing and investigation. Some investors are afraid that their losses will be irretrievable, and have repeatedly requested the judicial authorities to increase the recovery of stolen goods through letters and visits and online channels.
In the face of the anxiety and expectation of many investors, the procuratorate has included the recovery of stolen goods and losses as an important task of investigation and guidance. Yang Tingting introduced: "After intervening in advance in accordance with the law, we immediately guided the investigators to find out the property situation and take corresponding compulsory measures in a timely manner to avoid the transfer of property by relevant personnel; At the same time, we should pay attention to the reception of investors' letters and visits, patiently answer investors' doubts through explaining the law and reasoning, show the determination and attitude of the judicial authorities to protect the legitimate rights and interests of investors, appease investors' emotions, and convey judicial temperature with heart. ”
By the time the case was prosecuted, the procuratorate guided the public security organs to seize more than 70 immovable properties in accordance with the law, freeze 11 fund accounts in the names of relevant companies and persons involved in the case, and ascertain the fact that Su actually held 16 million yuan of creditor's rights. Under the careful persuasion of the prosecutor, Su expressed his willingness to provide property in his name that was not involved in the case for further repayment. The procurator comprehensively considered the role of the three criminal suspects in the criminal conduct, voluntary surrender, admission of guilt and acceptance of punishment, return of stolen goods and restitution, and other circumstances, and separately put forward sentencing recommendations.
On July 3, 2020 and April 19, 2021, Su's case was twice**; On December 16, 2020, the case of Gao and He** was heard. After trial, the court adopted all the accusations and sentencing recommendations put forward by the procuratorate, and on May 20 and September 1, 2021, respectively, sentenced Su to five years in prison and a fine of 300,000 yuan for the crime of illegally absorbing public deposits, and sentenced Gao and He to three years in prison and a fine of 100,000 yuan each. The public security organs and judicial organs froze a total of more than 6.87 million yuan in bank accounts involved in the case, and recovered the 16 million yuan of defendant Su's creditor's rights against others and the interest, dividends, commissions, and rebate fees of 35 investors in accordance with the law, and returned them to the investors after the judgment took effect.
Delegate Reviews
Deputy to the National People's Congress.
Chairman of the Board of Directors of the Construction Engineering Management Consultant of the National Federation of People's Union.
Huang Xiqin. **The general secretary stressed that maintaining financial security is a strategic and fundamental matter related to the overall economic and social development of our country. The case occurred in the early stage of the development of private placement, and the procuratorate's case-handling process was like an industry operation guide, with an in-depth analysis of the specific operation process of private placement, clearly defining the common criminal methods and legal characterization of "pseudo private placement", and taking into account the legal deterrence and protection of rights and interests. For both the industry and investors, this case has strong warning and educational significance.
In the face of new types of crimes such as private placement, the procuratorial organs can deeply study and study cross-border professional knowledge, and form high-quality transformation and application, which fully demonstrates the legal responsibility of prosecutors in overcoming difficulties in the new era and the advancement of judicial capabilities, and will provide a strong legal guarantee for promoting the healthy and steady operation of private placement, preventing and resolving major financial risks, and enhancing the public's legal awareness of financial investment.
*: Procuratorate** • Der Spiegel Author: Zhou Hongguo, Li Yuqing, Wang Qian, Guo Zhiyong).