A so-called "AI quantitative" scheme called TS Robot collapsed: more than 200 investors put in over RMB 46 million and ultimately lost more than RMB 28 million. The operator was sentenced in October 2023, but the scheme did not stop; someone took over and continued to run it, and someone else was specifically responsible for keeping the accounts.
Today we will discuss the people standing on the sidelines after the scheme collapsed: those who received commissions, those who lent their name and solicited orders, those who helped write code, and those who took over operations. Are they actually in league with the operator?
First, what crime does the "scheme" constitute?
To determine what crime an "AI quantitative cryptocurrency trading" scheme constitutes, one may first look at the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fund-Raising (hereinafter the "Interpretation"), which took effect on March 1, 2022.
Article 1 of the Interpretation sets out four conditions for "illegally absorbing public deposits," which may be summarized as the "four characteristics": illegality, openness, inducement, and sociality.
Article 2, item 8 of the Interpretation provides that where funds are illegally absorbed through online lending, investment in shares, virtual currency transactions, or other such means, the crime of illegally absorbing public deposits shall be convicted and punished.
When these four characteristics are applied to AI quantitative schemes, they will most likely be met in every respect: no lawful permission from the relevant authorities; public solicitation through WeChat groups, short videos, and offline salons; promises of "1% daily earnings" and "monthly returns that double"; anyone can invest upon joining the group, and anyone can invest.
If the operators tampered with the back end, the charge will escalate accordingly. In the TS Robot case, the investigating authorities verified that the platform artificially altered transaction data to create a false appearance of profit; in the CGC coin case, the operators used the back end to make the candlestick chart of a self-created coin appear to rise by about 3% per day, and ultimately drove the price down to near zero within a single day.
The dividing line is whether there was an "intent of illegal possession"—in plain terms, whether the operators never intended to repay from the outset. If so, it is no longer the crime of illegally absorbing public deposits but the crime of fund-raising fraud, which carries a much heavier penalty.
If the scheme involved "recruiting people by headcount and multi-level rebates," it may also simultaneously constitute the crime of organizing and leading pyramid selling activities. Under Article 13 of the Interpretation, where both crimes are constituted, the heavier crime shall be chosen for punishment.
Those who obtained benefits fall into four categories
First, those who helped publicize, lend their name, and recruit people.
Paragraph 2 of Article 12 of that Interpretation is very clear: where a person knows that another person is engaged in fundraising criminal activities such as illegal absorption of public deposits or fundraising fraud, and provides advertising or other promotional services for that person, the person shall be treated as an accomplice to the relevant crime.
Let me explain "accomplice" here: you and the person operating the scheme are treated as being in the same case, not separately, and it is not a matter of "I only brought in a few people, so I am only responsible for those few people's money." Ultimately, the extent of your liability depends on your status, role and degree of participation.
Second, those who write code and build platforms.
Do you think you merely "took on an outsourced project"? The CGC coin case has already provided the answer: Xiong and others commissioned Cai and others to develop trading software; Xiong was convicted of fund-raising fraud and sentenced to fifteen years; Cai and others, knowing that others were using information networks to commit crimes, still provided technical support and were convicted of the crime of assisting information network criminal activities, sentenced to one year. (Cai's two offenses combined resulted in a final execution of three years; the extra time was because, while writing the software, he withheld users' deposited Tether, which additionally constituted theft. A reminder to everyone: "eating the black" is also a crime!)
Third, those who take over operations and manage the money.
The official notice in the TS Robot case directly named the individuals: after Chen Moujia was sentenced, Chen Moubing continued to operate the scheme, and Liu Moumou was responsible for fund accounting.
Taking over after the operator had already been sentenced does not support any claim that "I was just helping clean up"; this is called joining an ongoing crime.
Fourth, ordinary investors who casually brought relatives and friends into the group.
This is the area closest to most people and also the most ambiguous. If you only brought in people you know and received no benefit yourself, you generally would not reach the level of accomplice; but once you start taking referral commissions or tiered rewards, the nature begins to move toward the first category.
If you do get drawn in, first clarify four things
First, the degree of knowledge.
Sending a link once for a relative or receiving a red envelope once is completely different, in legal terms, from long-term profit sharing and continuing to recruit people while knowing the data is falsified.
The fact that one's own money was invested in it and one also suffered losses is strong evidence for asserting a lack of actual knowledge. In 2019, the Supreme People's Court, the Supreme People's Procuratorate and the Ministry of Public Security, in the Opinions on Several Issues Concerning the Handling of Criminal Cases of Illegal Fund-Raising, acting in accordance with the criminal policy of balancing leniency with severity, provided for punishing the few and educating and redeeming the majority, and conduct whose circumstances are obviously minor and whose harm is not significant is not treated as a crime. Therefore, the case-handling authorities should not lightly characterize investors directly as accomplices.
II. The amount involved.
The amount of illegal absorption is calculated on the basis of the full amount of funds absorbed; as to you personally, it is calculated on the basis of the amount you actually participated in absorbing.
The Minutes of the Symposium on Several Issues Concerning the Handling of Cases Involving Internet Financial Crimes of the Supreme People's Procuratorate (Gao Jian Su [2017] No. 14): funds invested by the person himself and his close relatives, and funds registered under your name but in whose absorption you neither participated nor from which you obtained any benefit, are not counted in your absorption amount and may be directly deducted upon judicial accounting appraisal; although these two categories are not counted against you, they will still be counted against the person above you in the hierarchy.
III. The charge.
The CGC coin case is a ready example: the technology provider ultimately secured a conviction for the crime of assisting information network criminal activities, rather than for fund-raising fraud or as an accomplice in illegal absorption, and the differences in sentencing and in liability for restitution are enormous.
IV. Timing of restitution.
Article 6 of the said Interpretation expressly provides that where, before a public prosecution is instituted, the offender actively returns the illicit gains and makes restitution, reducing the occurrence of harmful consequences, a lesser or mitigated punishment may be imposed.
The pattern in such cases is: the earlier one exits and the earlier one makes restitution, the more favorable one's position; once the platform collapses, there are fewer options left for dealing with the matter.
Lawyer's Observations
AI is a tool and also a cover. But what crime is constituted has never depended on how novel the concept is, but on how the money came in, what was promised, and whether the back end was manipulated.
Liability in a scheme is not distributed equally: the operator may get fifteen years, the coder may get one year, and those who lend their name and recruit people fall in between.
Which tier you fall into depends on where you sit in the chain, as well as what you did, what you received, what you knew, and how long you did it.
