How scary are the “OneCoin” pyramid schemes? Prosecutor: If I hadn’t been handling the case, I would have given all my salary to the other party

A well-known local boss

Met a beautiful and smart "confidante"

In the soft Wu dialect,

He bet all his belongings

But ended up losing everything

The beauty is in prison, talking freely.

The prosecutor almost wavered...

In just one year, we have developed more than 800 members.

MLM funds of more than 25 million

What is the beauty's speech?

People are going crazy

Is it because the deception is too clever?

Or does everyone want to be like Jack Ma?

On the morning of December 14, 2016, a man in his 40s, dressed simply and looking lonely, walked into the gate of the Haiyang Public Security Bureau. Someone recognized him as Liang Dong, a well-known detergent king in Haiyang. But not long ago, his business went bankrupt.

A company that had been operating for decades was closed down, and now the boss was taken to the police station. The space behind this is enough to make people imagine. Some people said that he had offended the underworld and was retaliated against, and some people speculated that Liang Dong's industry had been seized due to improper transactions... Listening to people's discussions, Liang Dong smiled bitterly. No one would have thought that he went from being a detergent king to being heavily in debt just because of a woman.

1

Chinese New Year 2016.

At a dinner party, Liang Dong, who was successful in his career, met Dong Limei. As soon as they met, he was immediately attracted by the beauty in front of him. Dong Limei, who was in her 30s, had shed her youthful immaturity and exuded the charm of a woman. She was elegant in manners, generous in conversation, and her big eyes blinked as if she wanted to see into Liang Dong's heart.

What surprised him even more was that he found that Dong Limei was not only beautiful, but also had a good business sense. Many of her insights impressed Liang Dong. After the dinner, they had a great conversation and left their WeChat accounts with each other.

Cheng Shaofei, a prosecutor of Haiyang Municipal People's Procuratorate:

In fact, it is not just Liang Dong. Almost everyone commented on Dong Limei: she is beautiful, good-tempered, gentle and generous. She is talkative, but what she says is not offensive, so it is easy for her to gain people's trust.

Since then, Liang Dong and Dong Limei have kept in touch. Because Dong is very business-minded, Liang Dong sometimes consults her opinions on business matters and regards her as a confidant.

After several exchanges, Liang and Dong have established a "deep friendship" and gradually became interested in the investment opportunities that Dong Limei always mentioned intentionally or unintentionally.

Cheng Shaofei:

Liang Dong started from scratch and ran several local detergent stores. He lived a wealthy and hardworking life. Before this, Liang Dong was not very interested in investment and had never been exposed to it, but with Dong Limei's frequent recommendations, he began to consciously learn about it.

In order to let Liang Dong know more, Dong Limei pulled Liang Dong into a group called "Tianzhuan System". Dong Limei created this group to make people go from being uninterested and unfamiliar to being eager to try.

Cheng Shaofei:

The group owner is Dong Limei. According to the testimony of the victims later, this group is used to promote and explain OneCoin. They will share the latest information and advocate its development prospects and benefits in this group.

2

After reading the case file, the prosecutor had a rough idea in his mind: it was a pyramid scheme, and a new type of online pyramid scheme. From characterization to evidence collection, it should be extremely challenging.

Now, she first had to meet this eloquent and "seductive liar".

Cheng Shaofei:

In fact, before I interrogated her, I had the impression that she was a liar. The victim's testimony seemed to me to be either not vigilant enough or too greedy. I didn't believe she was really that capable.

But after Cheng Shaofei met Dong Limei in the interrogation room, she realized that her original prediction was totally wrong.

Cheng Shaofei:

She is very beautiful, elegant, and well-spoken. Her words are like magic, attracting you to listen and even believe. After the interrogation that day, I returned to the office. The more I thought about it, the more scared I became. To be honest, if I were not a prosecutor, if I had not handled this case, I might really want to give my salary to her.

It was this meeting that made Cheng Shaofei re-examine the case. She pondered over and over again, why would so many people with rich experience and seemingly "immune to all poisons" be shaken? Was it because Dong Limei's words were too deceptive, or was OneCoin really that tempting?

In order to find out the truth, she read through all the information about OneCoin, looking for direction.

OneCoin

Cheng Shaofei:

OneCoin is a new network virtual currency. It is the second generation of cryptocurrency after Bitcoin, so it is called the second generation of Bitcoin. According to OneCoin, OneCoin inherits the wealth appreciation property of Bitcoin, but it is more innovative in financial thinking and concepts. After investors purchase an account, they will get the corresponding tokens. By using the tokens for "mining", they can get the corresponding OneCoin returns.

As early as July 2015, Dong Limei joined the "Digital Currency OneCoin Financial Management" project under the introduction of an acquaintance, and in April of the following year, she established the OneCoin Business Information Consulting Service Department in Haiyang, specializing in the development of OneCoin members and developing OneCoin profit as a career development. In Dong Limei's words, OneCoin is the "second generation of Bitcoin", it has a prominent foreign background and an easy way to make money, as if people can seize the opportunity and make a fortune as long as they have the vision to discover it.

It all sounds good, but for most people, they only vaguely know that Bitcoin is very popular and many business leaders have invested in it, but few people can really say anything about it. So, what is Bitcoin, the "first generation of OneCoin"?

Cheng Shaofei:

Simply put, Bitcoin is a currency that runs on the Internet and is universally used around the world. It is "money" that is not controlled by the central government or central bank. It is also called "electronic gold". It can be used not only as a currency, but also as a widely watched investment target. Users can buy Bitcoins, and they can also use computers to perform a large number of calculations according to algorithms to "mine" Bitcoins. This "mining" process is called "mining". In every 10 minutes, whoever mines the mine first will be rewarded with a certain amount of Bitcoin. This reward process is the process of issuing Bitcoins.

Bitcoin

Some people may ask, doesn’t OneCoin also get corresponding returns through “mining”? They are obviously “twin brothers”, why is Bitcoin recognized, while OneCoin has become a rat crossing the street that everyone shouts and beats?

Cheng Shaofei:

After research, it can be seen that although OneCoin claims to be the "second generation of Bitcoin", it has many differences in its practices. For example, Bitcoin does not require membership fees, the mining source code is open, and there is no "recruiting" marketing, but OneCoin has not achieved these three points. Among them, the most critical mining source code OneCoin has always been mysterious and unwilling to disclose it. Although its company has confirmed that it is a "direct sales" company, it has never obtained a domestic license. In 2017, CCTV announced a list of 350 pyramid schemes, and OneCoin was listed.

OneCoin

In 2017, CCTV announced a list of 350 pyramid schemes, and its website was on the list.

In 2016, Dong Limei and others took advantage of people's lack of understanding of these online currencies and deliberately blurred the concepts and confused people. Seeing that OneCoin was developing well, Dong Limei and others introduced a project called "UCM", which also used similar means to conduct pyramid selling. In less than half a year, Dong Limei alone developed more than 800 members in these two projects, and the accumulated pyramid selling funds reached more than 24 million yuan.

3

As the case progressed to this point, Cheng Shaofei became even more confused. Although Dong Limei was eloquent, how could such a large-scale pyramid scheme not make people alert? Could it be that everyone was "brainwashed"? By visiting the victims one by one, Cheng Shaofei got the answer in his mind.

Cheng Shaofei:

I found that Dong Limei and others did not teach courses about pyramid schemes or recruiting people in the group. Instead, the online staff and websites promoted how to manage money, how much money to invest, how much interest is paid every day, how much the OneCoin product has increased in value today, etc. In this case, OneCoin and UCM websites promoted personal financial management, product value-added, etc., and the wording and slogans were extremely tempting and deceptive.

Many downline members, out of trust in high-tech financial management on the Internet and lacking judgment, believed that this was real e-commerce. When the public security organs approached them to collect evidence after the incident, they repeatedly emphasized that what they participated in was not a pyramid scheme, but a new type of Internet financial management behavior.

So, does this case constitute pyramid selling?

Facing numerous difficulties and confusions, Cheng Shaofei kept looking through materials, trying to find a breakthrough in each law. Just when the case was about to reach a deadlock, an idea flashed through her mind, allowing her to suddenly see the light through the clouds.

Cheng Shaofei:

Putting aside other factors, I want to first characterize this case. Whether it is a pyramid scheme, how to determine it, and whether the evidence meets the standards, I decided to take it step by step. Although in this case, the pyramid scheme organization claimed that they did not restrict personal freedom and their purpose was to promote online financial products, no matter if the pyramid scheme organization is dressed in a legal guise such as investment or buying a house, as long as it meets the direct or indirect number of recruits as the basis for remuneration or rebates, and induces or coerces participants to continue to recruit others to participate, it is a pyramid scheme.

The case was classified, but then something even more troubling for the prosecutors came: this case was not only a pyramid scheme, but also a new type of online pyramid scheme. In the absence of experience in such cases, the case was particularly difficult to handle.

Cheng Shaofei:

There are great differences between online pyramid schemes and traditional pyramid schemes. The first is the different channels used. Online pyramid schemes use websites as pyramid scheme platforms. The Internet is a virtual space. Pyramid schemers use the characteristics of the Internet as a high-tech product and use the name of high technology to cover up their tracks. They have developed from traditional physical pyramid schemes to purely developing members to obtain funds. The payment method is online payment, which is completely e-commerce, instead of needing to hand it over to the upline like traditional pyramid schemes.

In this way, online pyramid schemes become more deceptive and covert.

In this case, Dong Limei and others used websites and WeChat groups to spread false propaganda and attract investment from downstream personnel.

Cheng Shaofei:

These people are very good at "winning hearts". They draw a pie for downline personnel, making them believe that the prospects are very bright, and there are very high commissions for developing members. The investment capital will be quickly recovered in the process of developing downline personnel, and the investment principal will greatly increase in value in the future. Such a low-risk, high-return investment is simply a "pie in the sky" to anyone, and it seems like a blessing to be able to hit it. Some downline personnel recruit their relatives and friends to become members and become their downline.

While they are planning a "bright future" for their products, they are also leaving enough "escape space" for themselves.

Cheng Shaofei:

In this case, all members joined online, using pseudonyms or code names, and had their own login passwords. In addition, members were required to join through bank transfers, which avoided the situation in traditional pyramid schemes where the downline and upline had to meet in person. The manipulators moved from being in the open to being in the dark. If the downline personnel were caught by law enforcement agencies, the upline could also escape. It also greatly increased the difficulty for the public security organs to solve the case. It was very difficult to find the downline based on the virtual network code when looking for the downline.

This is the second difference of online pyramid schemes.

Traditional MLM methods often gather downline members together for lectures and brainwashing, but online MLM does not restrict personal freedom at all. Members have broken through geographical restrictions and are no longer confined to a region. The Internet is cross-regional, allowing online MLM to break through geographical and national restrictions.

Due to local jurisdiction restrictions, local industrial and commercial bureaus can generally only supervise pyramid schemes within their jurisdiction, and public security organs also face difficulties when investigating and collecting evidence in such cross-regional cases.

Cheng Shaofei:

In this case, the public security organs traveled to several places across the country and spent a lot of police force to obtain testimonies from downline personnel and Dong Limei's upline personnel. In addition, the website registration places of OneCoin and UCM, which Dong Limei joined in this case, are still abroad. Nowadays, the laws on pyramid schemes in various countries are different, so it is difficult to punish the top leaders, which is also a regrettable part of the case.

On May 2, 2017, the People's Procuratorate of Haiyang City filed a public prosecution against Dong Limei and others for organizing and leading pyramid selling activities with the People's Court of Haiyang City. The trial was held on September 6 of the same year. On May 4, 2018, the People's Court of Haiyang City sentenced the defendant Dong Limei to seven years in prison and a fine of RMB 300,000 at first instance. After the verdict, the defendant appealed, and on October 29, 2018, the Intermediate People's Court of Yantai City ruled to uphold the original verdict against Dong Limei.

The case came to an end, but Cheng Shaofei's thoughts did not stop. In recent years, after the state continued to crack down on illegal and criminal activities of pyramid schemes, the forms and methods of pyramid schemes have gradually evolved and mutated, becoming more covert and more deceptive. Faced with numerous fogs and obstacles, how should prosecutors respond?

Cheng Shaofei:

"No matter how covert or complicated the sales method is, as long as it meets one of the following conditions, it is a pyramid scheme." For example, from the perspective of organization, the pyramid scheme organizer promises participants high returns and recruits others to join. Participants then introduce and recruit others in the same way, thus forming a pyramid scheme network with close connections between upper and lower lines; from the perspective of remuneration, the organizer calculates and pays remuneration based on the number of downlines recruited by participants, or based on the sales performance of downlines recruited by participants, thus forming a pyramid scheme "money chain". From the perspective of business purpose, pyramid schemes do not have the ultimate goal of selling goods, but rather the ultimate goal of recruiting people and defrauding money.

Here, the prosecutors also want to remind the majority of investors to establish a correct investment and financial management concept, not to be superstitious about getting rich overnight, and not to be tempted by high returns and indulge in it. As long as you establish a correct consumption and financial management concept, you can easily see through various false scams and protect your legitimate rights and interests.