AI summarySpecial Declaration: This article is an original work by Attorney Shao Shiwei. It represents only the personal views of the author and does not constitute legal consultation or legal advice on specific matters. For article reprints, legal consultations, or business exchanges, please add: sswls66
Special Declaration: This article is an original work by Attorney Shao Shiwei. It represents only the personal views of the author and does not constitute legal consultation or legal advice on specific matters. For article reprints, legal consultations, or business exchanges, please add: sswls66
On May 14, 2024, the Fengtai Police in Beijing issued a notice titled:"Reversal! Complainant Becomes Suspect: Fengtai Police Solve a Case of Organizing and Leading a Pyramid Scheme". At first glance, this headline appears quite alarming. However, upon reflection, such situations do indeed arise in certain criminal cases. In the criminal cases involving victim complaints and rights protection that Attorney Shao handles in his daily practice, some victims share similar concerns. Some clients have asked me: "Attorney Shao, the police officer called and asked me to come to the police station later to give a statement. Haven't I already done this many times before? Will I be arrested when I go there?"Clients who find themselves in dire straits may not be able to accurately determine whether they are "victims" or "criminal suspects" due to a lack of relevant legal knowledge.。
So,what should one do in such situations?Can such "criminal suspects" be deemed to have voluntarily surrendered? Today, we can discuss this case handled by the Beijing police.
Author of this article | Attorney Shao Shiwei
01
Introduction to the Huayinghui Pyramid Scheme Case
1. The Beijing Fengtai Case: Complainant Becomes Suspect
According to the article published by the Fengtai Police, the complainant, Mr. Xie, joined an organization called "Hua Mou Hui" through a friend's introduction and invested by purchasing virtual currencies. He initially made small-scale attempts and found the investment returns satisfactory. Consequently, Mr. Xie invested his entire savings of RMB 2 million from his household, only to become trapped. Due to being trapped, Mr. Xie began seeking new ways to generate profits: following the instructions of his uplines to "recruit heads" and develop downlines. Mr. Xie developed downlines across 9 levels, totaling more than 300 individuals. Subsequently, the platform collapsed, and the downstream investors demanded their money back from Mr. Xie.Mr. Xie then filed a police report. After filing the report, Mr. Xie was criminally detained by the public security authorities.
2、Regarding the Huayinghui Pyramid Scheme Case
Although the Fengtai Police referred to the pyramid scheme platform as "Hua Mou Hui" in their publication, investigations into Huayinghui for involvement in pyramid schemes had been launched by police forces across various regions of China since around July 2023. As a criminal lawyer specializing in cryptocurrency-related cases, I have previously received numerous consultations from victims seeking rights protection. Therefore, it can be determined without doubt that "Hua Mou Hui" refers to "Huayinghui."
According to online reports, Hopingclub (Huayinghui) is an investment institution founded on Wall Street by Kobe Sadan, CEO of Viking Dragon Fund. In November 2022, Huayinghui acquired a 30% stake in REVA, a leading enterprise in the NFT sector, for USD 100 million. Huayinghui and REVA entered into a strategic cooperation regarding REVA's NFT staking, custody, and auction business. According to Huayinghui's public promotional information, the official version of REVA's NFT business, R-meta, resulting from this cooperative transaction, was officially launched on January 16, 2023. As of June 23, 2023, the cumulative sales amount of NFT collectibles exceeded USD 350 billion. However, this version of NFTs differs frommainstream digital collectible platforms in that it lacks on-chain transparency and cannot be traded at any time; instead, it requires a long lock-up period.
Around June 2023, frequent reports of the platform's collapse emerged. Many users chose to file police reports due to the suspension of withdrawals. In July 2023, the Ji'an Municipal Government issued a "Risk Warning Regarding Abnormalities in Huayinghui Linghang Guild Financial Investment Products" on its official website. In the second half of 2023, public security authorities in Xinyu City, Linquan County, Shou County, Jinxi County, and other locations successively issued notices regarding suspected cases of organizing and leading pyramid scheme activities involving the Huayinghui platform.
02
Why Did the 'Complainant' Become a 'Criminal Suspect'?
As mentioned above, Mr. Xie initially acted as a user, investing his funds into the platform with the aim of obtaining investment and financial management returns. To absorb more capital, the Huayinghui organization established various mechanisms. For example, its investment software "R-meat" featured an "R-meat Growth System," where users could upgrade their levels by purchasing collectibles of different grades; higher levels granted access to a wider selection of collectibles. Promotion commissions varied according to user levels, with 30% of the promotion commission settled in USDT and the remaining 70% released daily on a pro-rata basis.
Additionally, the platform restricted withdrawals or login access for users who invested large amounts of capital, citing various reasons.To continue withdrawing funds, users were required to help the platform recruit new members.(However, this was inherently a scam; even if new members were recruited, users still could not withdraw funds.) Due to the limited information in the Fengtai Police's notice, we can only speculate that Mr. Xie may have fallen into this category of users.Therefore, it appears that Mr. Xie was indeed a "victim"?To answer this, we need to understand the legal provisions regarding the crime of "organizing and leading pyramid scheme activities."
Although Article 224 of the Criminal Law of the People's Republic of China appears to limit this offense to "organizers and leaders," implying that only internal leadership personnel of the Huayinghui platform would constitute this crime, the 2013 "Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases of Organizing and Leading Pyramid Scheme Activities" had already defined "organizers and leaders of pyramid scheme activities." Mr. Xie's actions fall under circumstance (5) of the aforementioned provisions. In order to continue withdrawing funds from the platform, he developed downlines across 9 levels, totaling more than 300 individuals, in accordance with the platform's mechanisms. Thus, he played a significant role in the expansion of the platform's pyramid scheme organization.
2013 "Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases of Organizing and Leading Pyramid Scheme Activities"
II. Issues Concerning the Identification and Handling of Personnel Involved in Pyramid Scheme Activities
The following personnel may be identified as organizers and leaders of pyramid scheme activities:
(1) Personnel who play a role in initiating, planning, or manipulating pyramid scheme activities;
(2) Personnel who assume responsibilities for management, coordination, etc., in pyramid scheme activities;
(3) Personnel who assume responsibilities for publicity, training, etc., in pyramid scheme activities;
(4) Personnel who have previously received criminal penalties for organizing or leading pyramid scheme activities, or administrative penalties for organizing or leading pyramid scheme activities within one year, and who directly or indirectly develop more than fifteen participants in pyramid scheme activities across three or more levels;
(5) Other personnel who play a key role in the implementation of pyramid scheme activities, the establishment of pyramid scheme organizations, their expansion, etc.
03
Can Mr. Xie's Actions Be Deemed as 'Voluntary Surrender'?
Since there is no dispute regarding the conviction, striving for a lighter or mitigated punishment is more likely to achieve an ideal defense outcome than making futile claims of innocence. According to legal provisions, "criminals who voluntarily surrender may be given a lighter or mitigated punishment. Among them, those whose crimes are relatively minor may be exempted from punishment." Therefore, as a criminal defense lawyer, I generally strive to secure the circumstance of voluntary surrender for my clients, taking into account the specific facts of each case.
In this article, Mr. Xie initially went to the police station to file a report with the mindset of a "victim." After investigating the facts, the public security authorities determined that his actions constituted a crime and criminally detained him. Can Mr. Xie's actions be deemed as 'voluntary surrender'? Let us state the answer first:Such circumstances are controversial in practice.
I previously handled a case involving the crime of aiding information network criminal activities. The client went to the authority that had frozen his bank card to apply for unfreezing, only to be criminally detained by the local police for the crime of aiding information network criminal activities. Regarding the determination of voluntary surrender, I communicated with the handling officers. However, the officers in charge of the case believed that the clientsubjectively intended to unfreeze his bank card rather than to surrender himself, and therefore did not meet the standard for voluntary surrender under the Criminal Law.
However, in a previous "predatory lending" case, which involved multiple lending legal relationships with multiple participants and complex interpersonal relationships, the client I represented was both a borrower and a repayer. The client chose to file a police report due to unbearable harassment by creditors but was ultimately identified as an accomplice in the crime of fraud. In that case, I successfully secured the characterization of "voluntary surrender" for the client, who was ultimately sentenced to probation.
[Attorney Shao's View]
First, according to Article 67 of the Criminal Law, voluntarily surrendering after committing a crime and truthfully confessing one's crimes constitutes voluntary surrender. However, neither the Criminal Law nor the "Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in Handling Cases of Voluntary Surrender and Meritorious Service"prescribes the 'motive' for voluntary surrender.Motives may include hoping to obtain statutory leniency, being unable to face the pressure of debt collection, fearing retaliation by third parties, or even seeking a "safe haven." The motive for voluntary surrender should not affect the determination of voluntary surrender.
Second, the act of the party voluntarily going to the police station to file a reportrepresents their subjective willingness to submit the dispute to police handling,and objectively saves judicial resources that would otherwise be spent on investigating the case. (In this case, the Fengtai Police discovered that other provinces and cities had already identified Mr. Xie as a key member of the pyramid scheme organization and listed him as a target for crackdown.)
Third, due to a lack of professional legal knowledge, it is inevitable that parties may have a certain degree of "misinterpretation" regarding their own actions. According to the 2004 "Reply of the Supreme People's Court on Whether the Defendant's Argument Regarding the Nature of the Act Affects the Establishment of Voluntary Surrender," "the defendant's argument regarding the nature of the act does not affect the establishment of voluntary surrender." Therefore, Attorney Shao believes that as long as the party truthfully describes the facts of the case,even if there is a certain "misjudgment" regarding the event itself or their own identity, it should not affect the determination of voluntary surrender.
Fourth, in the case of Zhai Yonglin's intentional injury, cited in "Case Guidance and Understanding/Application of the Supreme People's Court's Judicial Interpretations on Voluntary Surrender and Meritorious Service," edited by Zhang Jun and Huang Ermei, the Supreme People's Court held that Zhai Yonglin's filing of a police report as a victim of robbery was an improper legal evaluation and understanding of his own actions. Although he had objections regarding the cause of the case after arriving at the authorities, he consistently and truthfully confessed to the fact of beating Wang Mounian. Therefore, his actions should be recognized as constituting voluntary surrender. Although China is not a case law country, the principle that similar cases should receive similar judgments is a basic rule for achieving justice. The "Guiding Opinions on Unifying the Application of Law and Strengthening Similar Case Searches (Trial)," issued by the Supreme People's Court in 2020, explicitly points out thatuniform judgment for similar casescan unify the application of law nationwide and enhance the credibility of the judiciary.
In summary, if Mr. Xie truthfully confessed the circumstances of the case, even if he believed himself to be a victim in the case, he should be recognized as having voluntarily surrendered.
04
Many people subjectively believe that once the principal offender is arrested, the case is over. This is not the case. This is also one of the reasons why some participants do not consider themselves suspected of committing crimes.
For example, the concept of "organizers and leaders" of pyramid scheme activities mentioned in this article is quite broad. In my previous article,"Explaining the Law Through Cases | How Can Web3 Games Avoid Pyramid Scheme Risks? Insights from a RMB 40 Billion Cryptocurrency Pyramid Scheme Case,"，2020I noted thatthe Yancheng Intermediate People's Court sentenced the principal offender in the PlusToken digital currency wallet case to 11 years in prison for the crime of organizing and leading pyramid scheme activities. Yet, just last month, someone consulted me, stating that their family member had recently been arrested by police in a certain location because their family member had acted as an agent for the PlusToken platform, recruiting new members(this was four years later).
Similarly, in cases of opening casinos, although online gambling platforms may have been shut down for several years, police across various regions continue to arrest agents. The platform owners may have long fled overseas, butdomestic agents, as long as they participated, cannot escape criminal liability.
This reminds me of an agent from a virtual currency exchange whom I spoke with last week. He discussed whether he should voluntarily surrender, mentioning that another agent with the same status had fled after receiving a phone call from the police requesting a statement, and was subsequently listed as a fugitive online. A couple of days ago, the police also called him. He reasoned that being listed as an online fugitive would make everything inconvenient, and evasion would not solve the problem, so he wanted to face the situation proactively. I thought his mindset was quite sound.
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