Viewpoint | A brief analysis of the boundary between the crime of organizing and leading pyramid selling activities and the crime of fraud.

Through the dismantling of the behavior patterns of the two, the author finds that the behavior pattern of the crime of organizing and leading pyramid selling activities can be summarized as follows: the perpetrator has the purpose of making illegal profits-in the name of selling goods and providing services, to give participants a certain "qualification"-based on the number of development personnel as a basis for remuneration or rebate-the number of participants is more than 30 and the level is more than three-participants have the nature or risk of being "defrauded of property: the perpetrator has the purpose of illegal possession-the implementation of deception-the victim has a wrong understanding-the victim disposes of property based on the wrong understanding-the perpetrator or a third party obtains property-the victim suffers property losses.

According to the above behavior pattern and combined with the actual situation, it can be seen that in form, the crime of organizing and leading pyramid selling activities and the crime of fraud exist fraud, and the fraudulent pyramid selling activities and the fraud crime of wrapping the pyramid selling coat are both paid to the participants who entered the market earlier using the funds of the late participants, which will lead to the loss of the participants who joined before the collapse of the funds. However, a closer examination of the pattern of behaviour reveals that, in essence, the two differ in terms of subjective purpose, objective behaviour, infringement of legal interests and loss of property at the point in time.

Although both the crime of organizing and leading pyramid selling activities and the crime of fraud have the motive of "defrauding property", in the latter, the next step for the perpetrator to defraud property is to realize illegal possession, which is direct and intentional. In the former, the next step for the perpetrator to defraud property is to make illegal profits, that is, to use other people's property to develop and expand pyramid selling organizations so as to obtain more benefits. The above view has also been gradually recognized by the Supreme People's Procuratorate. For example, teachers Chen Guoqing, Han Yaoyuan and Wu Jiaobin believe that "the crime of organizing and leading pyramid selling activities is different from the crime of property infringement, and illegal possession is not its subjective purpose". For example, teachers Zhou Jiaoluan and Zhang Jun believe that "the subjective aspect of the crime of organizing and leading pyramid selling activities can only be caused by intention and has the purpose of illegal profit".

typical case]

"Criminal Trial Reference Case No. 167" Yuan Ying, Ouyang Xiang, Li Wei Fund-raising Fraud Case "-Criminal Second Division of the Supreme People's Court

Facts of the case: Defendants Yuan Ying and Qi Zhijun (handled separately) premeditated the implementation of the "Poly Sale Plan" and rented a place in Jinfeng Building, 31 Hengfeng Road, Shanghai. Since then, Qi Zhijun and Yuan Ying have gathered Gong Zhiping, Ma Dezhao (a separate case) and the defendants Ouyang Xiang, Li Wei and others to Shanghai to participate in the implementation of the "Poly Sale Plan", and in the name of Jiangsu Dantu Longshan Poly Trade Development Co., Ltd., published an advertisement to launch the "Poly Sale Plan" to lure victims in the name of regular repayment of profits and high discounts, it is said that anyone who purchases its products such as New Ozawa Spirulina Tablets, Langjian Disinfectant Hand Cleanser, and Johnson & Johnson Superoxide Magnetized Living Water Machine at a price of not less than RMB 380 yuan per copy can fill in the "Poly Sale Registration Form" and obtain membership, thus enjoying a regular high discount once every 10 days. From June to August 1999, about 10000 copies of the "Poly Sale Plan" were sold, with a sales amount of about RMB 3.8 million. In mid-August, the defendants Yuan Ying, Ouyang Xiang, Li Wei, together with Qi Zhijun, Ma Dezhao and others, absconded to Nanjing with more than 180 million yuan defrauded, dividing up the illegal gains and escaping separately.

The court held that in the process of pyramid selling, Yuan Ying absconded with others with business money, which fully reflected that he had the subjective purpose of illegally occupying other people's property. He used illegal pyramid selling to defraud other people's property, and the amount was particularly huge.

According to the above cases, to judge whether the defendant has the purpose of illegal possession, it is not only required to prove that the defendant has illegally possessed other people's property, but also to prove that the defendant has evaded the return of the defrauded property, that is, the defendant sets up obstacles for the victim to recover the defrauded property, so that the victim cannot recover the defrauded property through civil relief channels. In pyramid selling activities, the defendant does not have the purpose of illegal possession of the participants' property at the beginning, but to use the participants' property to seek more benefits. The reason for the loss is that the number of participants cannot be increased indefinitely, and the financial chain is bound to break at a certain moment and thus cannot support the rebate, resulting in the risk of financial loss to the later participants.

The objective acts of organizing and leading pyramid selling activities and fraud crimes are both "defrauding property", but the concrete performance of the two is different. The former is the behavior of organizing and leading pyramid selling activities, while the latter is the behavior of fabricating facts and concealing the truth. Although pyramid selling activities are often in the name of business activities such as selling goods and providing services, they have no real business activities and no profits, which seems to be in line with "fabricating facts and concealing the truth". However, the two are different in concealing the truth, the former's commitment content is the opportunity for participants to make a profit after paying the entry fee, concealing the risk of unsustainable and collapse at any time, rather than concealing the content of the commitment itself. There is a fact of delivery of the consideration (opportunity to make money) promised by the perpetrator, except that the consideration is flawed (uncertain); the latter's promise is to pay the corresponding consideration for the acquisition of the victim's property, concealing the content of the promise itself, I .e., the consideration will not be paid or the consideration already paid is false.

In addition, compared with fraud crimes, the crime of organizing and leading pyramid selling activities requires the perpetrator to establish a "laminated fraud" mechanism, that is, some personnel are cheated to participate in pyramid selling, while some are clear and voluntary. However, no matter whether they know the nature of fraud or not, once they join, they all think that they have the opportunity to make money and do not think that they have losses, the continuous development of offline activities has led to more people getting involved, which together makes the MLM fraud mechanism work. But in fact, the process of increasing the number of MLM organization personnel is actually a process of risk accumulation and amplification. Because it pays the "remuneration" and "rebate" of the early participants with the funds of the late participants, if no one joins, the "business activities" will gradually fail to operate, and the late participants will face the risk of loss.

typical case]

1. Tang Shaocong, Tang Haili and other fraud crimes of second instance (2019) Zhejiang 07 sentence final 397-Zhejiang Jinhua intermediate people's court

Facts of the case: Defendants Tang Haili, Tang Shaocong and others have planned to publish recruitment advertisements for advertising media companies on WeChat and recruit advertising promotion personnel, which is a false advertising promotion project. Participants need to pay 468 yuan deposit and promote advertisements on WeChat to receive 32 yuan's salary every day. One of recommend can receive 88 yuan or 108 yuan bonus, and upgrade to the corresponding salary level according to the number of recommend. The salary and bonus paid are paid from the deposit collected. Since July 23, 2018, a large number of victims have been attracted to participate in false advertising projects because the fraud gang can pay wages and bonuses on time. On the 30th of the same month, the fraud gang disbanded WeChat group after paying a small amount of salary and bonus. Defendant Tang Haili transferred 832000 yuan three times in succession in the form of money laundering.

The defender believes that the case should constitute the crime of organizing and leading pyramid selling activities.

The court of second instance held that Tang Shaocong, Tang Haili and others made up companies and projects, using fixed high returns as bait to cheat the victim to pay money, and cut off contact with the victim after obtaining the money to pay part of the return. The actions of the defendant Yu Xinxia and others are in line with the constitutive elements of the crime of fraud. In this case, the victim's remuneration or rebate is only a means of fraud in this case.

In this case, the offender was able to make a normal rebate on July 23 and absorb a large number of participants. On the 30th of the same month, a small rebate was issued and the WeChat group was dissolved and the property was transferred, with a difference of only 7 days. It can be inferred that, although the appearance of the case in accordance with the "head" rebate shadow, but the perpetrator only a small amount of "entry fee" for short-term operation, business, what it conceals is not the risk of collapse at any time, but itself did not want to pay the corresponding consideration. In essence, this case is still a promise to the participants to break the cost of rebates.

2. Zhao Moumou organized and led pyramid selling activities in the first instance (2021) Lu 0702 Xingchu 57-Weicheng District People's Court, Weifang City, Shandong Province

Facts of the case: from September to November 2018, the defendant Zhao moumou used the "earn more" network platform of Shandong furitang e-commerce co., ltd. as a carrier to promote goods and provide services, requiring participants to obtain the qualification to join by purchasing mobile phones and mobile phone software with a unit price of 3980 yuan, and declared to the society to cooperate with Baidu, Sohu, Netease, Sina, Tencent and other major search engines, to carry out advertising sales operations and advertising promotion services, according to the click rate and the number of views to earn advertising fees, according to a certain order to form a hierarchy, directly to the number of development personnel as the basis for remuneration, to induce participants to continue to develop others to participate, defraud property, disrupt the economic and social order, its development line of 10 levels of 884 people. Defendant Zhao Moumou was arrested on November 16, 2020.

The court held that: the defendant Zhao Moumou, in the name of selling goods, required the participants to obtain the qualification to join by paying fees, and formed a hierarchy in a certain order, directly or indirectly using the number of development personnel as the basis for remuneration, to induce the participants to continue to develop others to participate, defraud property, disrupt the economic and social order, and his behavior conforms to the constitutive elements of the crime of organizing and leading pyramid selling activities.

In this case, the perpetrator used most of the "entry fee" for the operation and operation of the MLM organization, and created a highly risky and fraudulent business model, which in turn caused the property interests of a large number of participants to be at high risk. Even cause direct losses, what it conceals is the risk of unsustainable and collapse at any time. Similar cases include the "Yang Yinghui Organizing and Leading pyramid selling Case" with the case number (2019) Ji 0581 Xingchu 259, and the "Yuan Zhongkui and Zhang Xia Organizing and Leading pyramid selling Case" with the case number (2020) Lu 0921 Xingchu 83 ".

To sum up, it can be seen that when judging whether the behavior of the perpetrator constitutes the crime of organizing and leading pyramid selling activities or the crime of fraud, we can pay attention to the following aspects:(1) the content of the perpetrator concealing the truth;(2) whether a "laminated fraud" organization has been formed;(3) the proportion of the property defrauded by the perpetrator into the operation and operation of the organization.

In addition to the subjective and objective aspects that are difficult to discern in practice, the two differ in terms of the point in time of the legal interest infringed and the loss of property.

1. Different violations of legal interests

The crime of organizing and leading pyramid selling activities is located in the eighth section of the crime of disrupting the order of the socialist market economy in Chapter 3 of the Criminal Law. The legal interest it infringes is the order of the market economy and is a single object, and the property right is not the legal interest violated. Although some participants will have property losses, participants who believe that they can obtain profit-seeking opportunities when they know or may know that there are risks are involved, usually not by mistake, but by taking risks. And the entry fee involves the scope of illegal property used for crime, so the property rights and interests of participants are no longer concerned by criminal law. The crime of fraud violates the legal interests of property. For example, the crime of fraud is located in the crime of property infringement in Chapter 5 of the Criminal Law. Although the main legal interest violated by the crime of contract fraud is the market order, and the main legal interest violated by the crime of fund-raising fraud is the financial management order, the two are special fraud crimes, involving dual objects, and both infringe property rights.

2. Different points in time for determining the amount of property losses

The crime of organizing and leading pyramid selling activities is a crime of conduct, which is conditional on the completion of the act of organizing and leading pyramid selling activities. The loss of property of some participants at the time of the completion may not necessarily arise, either has been returned to the original, or there may be no loss because there is still a rebate opportunity, only when the financial chain is broken or the judiciary intervenes, the amount of loss of some participants who have not returned to the original is marked to determine. The crime of fraud is a typical result of the crime, to the victim's property loss as a condition of completion. At the time of completion, the amount of the victim's loss has been determined.

In practice, the crime of organizing and leading pyramid selling activities and the crime of fraud are often mixed or converted.

Common mixed situations, such as the perpetrator using the form of pyramid schemes to achieve the purpose of fraud crimes, while constituting the crime of organizing and leading pyramid schemes and fraud crimes, choose a felony punishment, according to the fraud crime conviction and sentencing. For example, in the case of "Luo so-and-so fund-raising fraud and illegal absorption of public deposits" with the case number (2020) Yu Xing Zhong No. 80, Judge Jiang Jiayun of Chongqing higher people's Court held that "Luo and others carried out the crime of fund-raising fraud with pyramid selling for the purpose of illegal possession, resulting in a fund gap of more than 0.6 billion yuan, which constituted the crime of organizing and leading pyramid selling activities and the crime of fund-raising fraud. The court chooses a felony and convicts and punishes it with the heavier punishment of fund-raising fraud, which can better reflect the compatibility of crime, responsibility and punishment, in line with the spirit of law, and in line with the provisions of the law".