How should the PlusToken case involving 50 billion yuan be defined?

Original source: OKEx

According to a recent report from the Procuratorate Daily, the first-instance verdict of the PlusToken case, the first large-scale case involving digital currency filed by the police, is as follows: the court sentenced 16 defendants including Chen, Ding, and Peng to fixed-term imprisonment ranging from two to eleven years for the crime of organizing and leading pyramid schemes, and imposed fines. The stolen goods, stolen money, interest, and criminal tools involved in the case were confiscated and turned over to the state treasury in accordance with the law.

This case involves more than 2 million people, with as many as 3,000 levels of hierarchy, and the total value of digital currency involved is nearly 50 billion yuan.

Although concepts such as blockchain and digital currency have been added, its static and dynamic income, downline development and other systems are still similar to previous pyramid schemes, and its essence is still a "Ponzi scheme."

Here is a brief review of the PlusToken case:

In early 2018, the suspects Chen, Ding and Peng planned to build the PlusToken platform. On May 1 of the same year, the APP was officially launched, claiming to be a digital currency value-added service.

In early 2019, the public security organs in Yancheng, Jiangsu Province discovered clues that Chen and others were suspected of using virtual currency trading platforms to organize and lead pyramid schemes. They immediately set up a special task force and reported to the Ministry of Public Security.

In June 2019, PlusToken was exposed to have difficulty in withdrawing coins.

On July 12, 2019, the Yancheng police in Jiangsu officially opened an investigation after receiving a report.

From July to August 2019, the Ministry of Public Security also organized Jiangsu police to go to Vanuatu, Cambodia and other countries to arrest 27 fugitives.

In March 2020, all 82 core members suspected of pyramid scheme crimes were arrested.

On July 3, 2020, the People's Court of Yancheng Economic Development Zone, Jiangsu Province held an open trial of the case.

On September 22, 2020, the first-instance verdict of the PlusToken case was announced.

How was the PlusToken case characterized?

The PlusToken case is difficult to characterize in two ways:

1. How to distinguish the nature of the many people involved in the case?

2. The assets involved in the case are all digital currencies, and transaction accounts and flows are difficult to track and review like RMB.

According to the article "Uncovering the 50 billion "Blockchain" Scam" in the Procuratorate Daily, the prosecutors in charge closely followed the essence of "pyramid schemes" and distinguished the nature of the people involved. The results of the distinction are as follows:

The organizing and leading roles played by the initiator Chen, the "strategist" Ding, the "operator" Peng and others in the pyramid scheme;

Among them, Ding was identified as the main culprit. He played the role of a "military advisor" in the pyramid scheme by using the guise of blockchain, hiring foreigners as "puppets", and forging overseas backgrounds.

When investigating the assets involved in the case, combined with the audit report and appraisal report provided by the public security organs, the prosecutor found that 450 bitcoins were missing. After a comprehensive review of the confessions, it was found that the final destination of the 450 coins all pointed to Lu Moulong, the younger brother of the person involved in the case, Lu Moumou. Subsequently, the public security organs took Lu Moulong as the center and radiated to the people around him, and conducted real-time monitoring of their communication devices and wallet account addresses.

After several rounds of inspection, more than 200 bitcoins and more than 100,000 EOS coins (exchanged from the 249 bitcoins transferred by Lu Moulong) were successfully recovered.

The final first-instance judgment is:

Ding was eventually sentenced to eight years and eight months in prison and fined RMB 4 million;

The remaining 16 defendants were sentenced to fixed-term imprisonment ranging from two to eleven years and fined accordingly.

Judgment Basis of Digital Currency MLM Case

After the results of today's trial were announced, Xiao Ou consulted OKLink's legal experts, who provided information about a similar case that had been concluded in May 2020 - the WoToken platform pyramid scheme case.

Interestingly, the WoToken case is somewhat related to the PlusToken case. In 2018, Li Moumou, Wang Xiaoying and others originally planned to engage in illegal pyramid selling activities on the PlusToken platform. They later left because they believed that the technology of the PlusToken platform was not mature, but they mastered the criminal methods of online pyramid selling.

They then hired technicians to develop an online pyramid scheme platform called WoToken and carried out online pyramid scheme criminal activities. The Binhai County Price Determination Center determined that the amount involved in the WoToken case was RMB 7706932020.

The result of the trial was that the persons involved in the case, Gao Moumou, Li Moumou, Wang Xiaoying, and Tian Moumou, were convicted of organizing and leading pyramid selling activities and were sentenced to fixed-term imprisonment ranging from two to nine years and fined between RMB 20,000 and RMB 2 million.

The judgment of the Binhai County People's Procuratorate of Jiangsu Province is based on Article 224-1, Article 310, paragraph 1, Article 312, paragraph 1, and Article 25, paragraph 1, of the Criminal Law of the People's Republic of China.

The main bases include:

Article 224-1 of the Criminal Law of the People's Republic of China:

Whoever organizes or leads pyramid selling activities under the guise of business activities such as selling goods and providing services, requires participants to obtain membership by paying fees or purchasing goods or services, etc., and forms levels in a certain order, directly or indirectly uses the number of people developed as the basis for remuneration or rebates, lures or coerces participants to continue to develop others to participate, defrauds property, and disrupts the economic and social order, shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention and shall also be fined; if the circumstances are serious, he shall be sentenced to fixed-term imprisonment of not less than five years and shall also be fined.

Article 312, Paragraph 1 of the Criminal Law of the People's Republic of China:

Whoever knowingly conceals, transfers, purchases, sells on behalf of others, or conceals or hides them by other means, shall be sentenced to fixed-term imprisonment of not more than three years, criminal detention or public surveillance, and shall be fined or fined alone; if the circumstances are serious, he shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years, and shall be fined.

In addition to PlusToken and WoToken, the same drama is being played out in every corner of the world every day. As the times change, the Ponzi scheme is also constantly improving. But its essence is still under the guise of low risk and high returns, using the funds of later generations to make up for the gap in the income of previous generations.

Here I would like to remind everyone that do not be greedy for high returns and high profits. Continuous learning and efforts to improve your ability to discern are the key to investment.