Xuzhou City cracked a major pyramid scheme involving 500,000 people and 10.9 billion yuan

"Virtual digital currency is coming with the force of thunder!" "Internet Golden Points (hereinafter referred to as 'EGD'), it will not make you rich overnight but it will make you rich for life!" In just two years, more than 500,000 people in China have been attracted by similar propaganda.
Today, these highly inflammatory words are still displayed in large, colorful fonts on some websites and public accounts, and many investors have been deeply trapped in the quagmire of pyramid schemes and find it difficult to protect their rights. Since March this year, the public security organs of Xuzhou City, Jiangsu Province, have cracked a major "Internet gold points" pyramid scheme case, arrested 49 suspects, arrested 16 people with the approval of the procuratorate, and frozen and temporarily withheld 380 million yuan of funds involved in the case.

The police said that the use of virtual currency for pyramid schemes has become a new feature of current online pyramid schemes, and investors should be highly vigilant.

Virtual currency + exchange items, subsequent investment will not be returned

In March this year, the Gulou Branch of the Xuzhou Public Security Bureau discovered during work that citizen Wei was suspected of participating in pyramid selling activities and was a downline member developed by Wang Hua. The latter, under the guise of giving away "Internet Gold Super Points" (hereinafter referred to as "ES") for purchasing "Global Exchange" shopping vouchers (hereinafter referred to as "FV"), developed more than 300 members and registered 1,659 accounts on the member development platform of "Global Win-Win Business Points Holding Group".

After tracing the suspects, the Gulou Branch of the Xuzhou Public Security Bureau found that a large-scale online pyramid scheme criminal gang headed by Pei and Wang Fang, the heads of Future World International Group, gradually surfaced. "They used companies such as Guangdong Wujie as cover in China to organize pyramid schemes by setting up 12 membership development platforms, online trading platforms and global online shopping platforms. The membership platform where Wang Hua was located was one of the 12."

"EGD is not physical gold, but a kind of encrypted digital asset. The total amount in global circulation is fixed at 42 million pieces. In November 2015, Pei announced that each EGD would be divided into 1,000 shares, and the online gold was born." The suspect, Pei's assistant Yao Moubo, confessed during interrogation that investors start investing in multiples of 10,000, with a minimum of 10,000 yuan. For every 10,000 yuan invested, a 10,000 yuan exchange voucher will be given, which is equivalent to 2,000 yuan of purchasing power and can be used for shopping in "Global Exchange". In addition, 10,000 ES points will be distributed, and the ES points in the early stage were 1 yuan each.

As the number of members increases and the demand grows, ES will appreciate, and investors can sell their ES to make money. Pei and others also stipulated that only when the price rises by 5% can the corresponding part of the increase be unfrozen and sold. "The result is that 1 yuan is equal to 1 ES in the early stage, and 7,000 yuan can buy 7,000 ES. When ES appreciates to 5 yuan, later investors invest another 7,000 yuan, but actually only buy 1,400 ES. The money invested by the later investors is earned by the early investors." Yao said.

If this continues, the higher the ES price, the lower the project's attractiveness will be, the weaker the trading liquidity will be, and the slower the growth of ES will be. According to the rule that "with a 5% increase, the money can be unfrozen and withdrawn", the money invested later was trapped. The criminal suspect Dong confessed that "few people can profit from it, and basically the money cannot be taken out once it comes in."

Developed 500,000 members in half a year, and transferred a large amount of funds overseas

In order to stimulate investors to continuously invest money, the company involved in the case opened up another benefit method of "dynamic rebate" on the ES platform, that is, the pyramid selling business model of "paid joining, forming a hierarchy, developing downlines, and commissions per person". "According to the number of members developed, it is divided into 4 levels and 20 levels, 1 to 5 stars, 1 to 5 diamonds, 1 to 5 crowns, and 1 to 5 golds. Each level corresponds to a different bonus return. You can get commissions by developing downlines, and commissions can be paid layer by layer." Yao Moubo said.

"Therefore, what the criminals let you hear is the ever-appreciating online gold that is out of reach, because the senior leadership of the organization can control the daily increase in real time in the background based on the fees paid by the recruits, thus realizing the essence of a pyramid scheme by having the funds paid by the bottom-level members be returned to the senior members and the entire website." said Wu Qiang, captain of the Cyber ​​Security Brigade of the Gulou Branch of the Xuzhou Public Security Bureau.

At the same time, in order to quickly obtain the funds paid by members for subscription points, the organization also established an "instant return" incentive mechanism of "payment on the same day, cash rebate commission on the same day" to attract more investors in the society to join, and then through relevant training and publicity, use this pyramid scheme to lure participants to continue to develop downlines. According to statistics, from October 2015 when the three major platforms were launched to April 7, 2016, in just half a year, more than 500,000 members were developed, involving funds of 10.9 billion yuan.

Pei, Wang and others, who knew well that ES was just a bubble and a tool for making money, used companies opened in Hong Kong and servers set up in the United States to control and manage 12 member development platforms, online trading platforms and the "Global Exchange" online shopping platform overseas in order to evade crackdowns. They also transferred about 1.5 billion yuan of illegal income overseas through fictitious trade and other means.

There are many variations of online pyramid schemes, and investors should carefully identify them.

The relevant person in charge of Xuzhou Public Security Bureau said that "Internet gold points" reflects the new characteristics of current pyramid schemes. First, pyramid schemes are carried out under the guise of virtual currency, a new thing, and at the same time, they attract people under the banner of e-commerce, personal finance, and distance education. The general public does not understand and is easily deceived. Second, the development of members is carried out on the Internet. Members must go through the website to join the pyramid scheme, and the user names used are all pseudonyms or code names. They have their own login passwords and mainly communicate with each other through instant messaging such as WeChat. This has changed the traditional model of setting up studios and order centers for pyramid schemes to organize activities, and has increased the concealment of pyramid schemes. Third, the Internet has enabled pyramid schemes to break through the restrictions of regions and national boundaries. The backbone personnel of pyramid schemes often set up their headquarters abroad, hide abroad to issue orders, and transfer funds abroad, making it difficult to arrest, recover the stolen money, and eradicate them.