Attorney Shao Shiwei | How Can Programmers Avoid Being Found to Be Accomplices in Pyramid Schemes Arising from Developing Web3 Projects? A Full Analysis of Five Risk Scenarios (Part II)

In this article "Part One, we reviewed the circumstances in which programmers commonly become involved in cases and the high-risk development scenarios in crypto/Web3 projects, and explained which system functions and technical roles are readily characterized by judicial authorities as "accomplice participants in a pyramid scheme structure."

This Part proceeds from the logic of judicial conviction to further analyze the criteria for holding technical personnel liable and to set out key recommendations for ex ante prevention and ex post evidentiary proof.

In virtual currency pyramid scheme cases, it is not uncommon for technical personnel who neither participated in promotion or recruiting nor were directly involved in fundraising to nonetheless be held liable by judicial authorities for the crime of organizing and leading pyramid scheme activities. The reason is that, from the current judicial perspective, whether a person "constitutes an accomplice in a pyramid scheme" does not depend on whether that person directly recruited downline members; rather, the focus is on whether the person provided substantive support through technical means for the establishment and operation of the pyramid scheme model, and whether the person possessed subjective knowledge and intent to communicate.

Under the Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases of Organizing and Leading Pyramid Scheme Activities (2013),organizers and leaders are not limited to initiators or operators, but also include "persons who play a key role in the implementation of pyramid scheme activities and the establishment and expansion of pyramid scheme organizations."This has become the legal basis on which judicial authorities determine the criminal liability of technical personnel.

Four core elements of an effective defense:

1. Whether the person "knowingly" knew that the project constituted a pyramid scheme model
 

Judicial authorities typically consider chat records, development documentation, depth of involvement and other factors to determine whether technical personnel knew that the project had pyramid scheme characteristics. If the person merely completed a one-off delivery according to functional specifications, did not actually come into contact with or understand the overall operating logic of the project, and did not participate in discussions of the rebate system plan, this supports the defense of "lack of subjective intent."

2. Whether there was a "meeting of minds" or joint collaborative conduct
 

If the person did not participate in the overall architectural design of the project, did not participate in the formulation of the system plan, and there was no joint development conduct, promotional conspiracy, or coordinated launch, then it may be argued that no criminal intent connection was formed with the platform side, thereby excluding the establishment of joint crime.

3. Whether project benefits were obtained and whether the person held an affiliated status

If the person did not hold platform tokens, did not receive rebates or commissions, did not enjoy node status rewards, and was not given special titles such as "consultant" or "partner," this indicates that the person did not obtain illegal gains within the pyramid scheme structure, and on that basis mitigating circumstances may be sought.

If the development content is a general-purpose system (such as a front-end interface or an ordinary database management system) rather than core functions specially designed such as "multi-tier rebates and team commissions," it may be possible to seek a finding of innocence or even non-prosecution.

Practical note: How to establish an effective defense strategy?

Drawing on the experience of Attorney Shao's team in handling multiple crypto-industry pyramid scheme cases, for programmers or contract developers, the defense strategy should focus on the three major elements of "subjective knowledge," "technical boundaries," and "status positioning," striving to clarify the scope of criminal liability to the greatest extent and to dismantle the presumption chain between "technical conduct = participation in conspiracy." If clear evidence can be established showing the independence and neutral character of the technical conduct and excluding coordinated contact and illegal gains, there is an opportunity to seek discretionary non-prosecution, a downgrade in characterization, or the application of probation.

Looking back at past cases, many technical personnel believed before the case came to light that they "were just writing code and did not participate in operations" or "were purely outsourced and did not understand the project," and only realized once the platform collapsed, funding broke down, police intervened in the investigation, and they were even identified as accomplices, core members, or even organizers, that they had long been "inadvertently swept" into the vortex of criminal legal risk.

From the perspective of judicial practice, whether technical personnel are held accountable depends not on whether they participated in project promotion, but on whether they had knowledge that the project possessed pyramid scheme characteristics and whether, through development, deployment, and other technical conduct, they provided substantive support for the construction and operation of the pyramid scheme structure. Therefore, a genuine compliance defense line should be moved forward to the initial stage of project contact—identifying project risks and clarifying technical functions before cooperation is the key for technical participants to avoid criminal liability and avoid being wrongly caught in pyramid scheme allegations.

(1) Identifying pyramid scheme characteristics such as "three-tier rebates + static returns" at the early stage of development

In the initial stage of project integration, technical personnel should focus on identifying whether the functions being developed serve an incentive structure of "recruiting people for rebates." The following types of elements are often high-risk signals by which judicial authorities identify a pyramid scheme model:
 • The reward hierarchy exceeds three levels, forming an obvious upline-downline relationship;
 • User returns derive from downline expansion rather than genuine transactions in goods or services;
 • Mechanisms exist such as "referral codes unlock returns" and "recruiting people unlocks withdrawals";
 • Claims are made using phrases such as "monthly returns of over 10%" and "arbitrage by moving bricks earns a fortune daily."

Such models are commonly found in blockchain games and wallet-type platforms. Although packaged as "node systems" or "task rebates," they essentially build the technical framework for capital recruitment, and once the model spirals out of control, it is highly likely to be characterized as a pyramid scheme structure.

(II) Clarify technical boundaries and proactively create records to delineate responsibility

Many technical participants mistakenly believe that "mere technical outsourcing" exempts them from liability, when in fact it is precisely because their role is ambiguous that they are easily implicated. In the early stage of development, they should proactively clarify responsibilities with the project party to ensure a traceable chain of evidence is formed:

 • Retain complete communication records, especially statements defining the boundaries of one's own role, such as "responsible only for page construction, not involved in the design of the rebate system";
 • Clearly specify the scope of services in the contract, avoiding vague wording such as "participated in system architecture" or "responsible for the business model";
 • Preserve source code delivery records and documentation to prove that the development content did not involve key pyramid scheme modules;
 • Project payment records should be labeled as technical service fees, avoiding any linkage to project profit sharing or rebates.

These materials not only help clarify role positioning in the future, but also serve as important evidence for drawing boundaries in the assessment of criminal liability.

(3) Stay away from "borderline conduct" to avoid being mistaken for participating in pyramid scheme operations

Many technical personnel originally provided only development services, but because certain "assisting with operations" conduct emerged during project advancement, they were ultimately treated by judicial authorities as important leads of "intent communication." For example:

 • Registering platform accounts to participate in "dividend distributions" or "airdrops," or assisting in demonstrating usage procedures;
 • Appearing in project white papers or promotional pages and being given titles such as "technical advisor" or "core partner";
 • Being pulled into internal testing groups or core operations groups to assist with answering questions and providing strategic suggestions;
 • Receiving platform tokens, node profit sharing, commission rebates, or other "benefit returns" beyond the development contract.
 

Once the above conduct is linked to the project's rebate structure, even if the original intent was to cooperate, it may be found by prosecutors to constitute "knowing participation" or even "organizer" status. Technical personnel should avoid entering sensitive areas such as project promotion, marketing, and settlement during cooperation, so as to prevent inadvertently leaving "traces of collusion."

(4) Upon detecting signs of a Ponzi scheme, stop losses promptly and preserve evidence

Once a project exhibits features such as withdrawal restrictions, extended lock-up periods, or the requirement to recruit people in order to unlock returns, or is accompanied by abnormal phenomena such as operations personnel becoming unreachable, the official website shutting down, or community groups disbanding, it has often already hit high-risk signals of a "Ponzi scheme."

At this point, if technical personnel continue to participate in development, maintenance, or system updates, they are highly likely to be regarded by judicial authorities as "assisting a crime while knowing," significantly increasing the risk of criminal liability.

Be sure to suspend cooperation immediately, draw clear boundaries, and properly preserve materials related to the project, such as technical delivery records, chat communications, payment and receipt information, and contracts and agreements, to provide evidentiary support for subsequently clarifying the scope of rights and responsibilities and proving that one is not a subjective accomplice.

Against the backdrop of China's regulatory framework that classifies virtual currency-related activities as illegal financial activities, the criminal law risks arising from the development activities of technical personnel involved in crypto industry projects are attracting increasing attention.

Drawing on several typical cases, this article systematically outlines the common roles played by Web3 technology developers who are held accountable in pyramid scheme cases, the judicial characterization logic, and the high-frequency risk scenarios, and clearly points out that the legal liability of technical personnel is no longer limited to "whether they promoted the scheme and recruited participants," but has returned to a dual test of "whether they provided substantive support + whether they possessed subjective knowledge."

In the current environment where the compliance boundaries of Web3 projects are blurred and regulation continues to tighten, having a preliminary awareness of criminal liability identification, clearly defining one's own scope of duties, and maintaining proper evidence trails during cooperation are key for technical personnel to reduce the risk of involvement in cases and hold the legal bottom line.

We focus on the prevention and defense of criminal law risks in the Web3 field and are committed to providing professional and practical legal support for technology practitioners. If you have any questions, you are welcome to communicate with us.