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Court trial Bank cards and online banking U-Shields seized by public security organs
This is a pyramid scheme that sells so-called "Darkcoin" on the Internet under the pretext of investing in virtual currency "Darkcoin" to attract members. It has a strict hierarchy and has developed more than 30,000 members in mainland China (calculated by cumulative registered accounts) in just 8 months, raking in nearly 1.5 billion yuan in profits. On April 14, after the prosecution of the Quanshan District Procuratorate of Xuzhou City, Jiangsu Province, the Quanshan District Court made a first-instance judgment, sentencing the defendants Du Ling and others to fixed-term imprisonment ranging from eight years and six months to three years and six months for organizing and leading pyramid schemes, and a fine of RMB 30,000. Fines ranging from one million to three hundred thousand yuan.
The Birth of the Copycat “Darkcoin”
Du Ling was born in Qingyuan City, Guangdong Province in 1963. She later settled in Hong Kong and became a permanent resident of Hong Kong. Because she ran the Du family money house business in Hong Kong, she was called the "underground money house queen" in Hong Kong and had extensive connections. On February 23, 2009, Du Ling was sentenced to two years and six months in prison by the Shenzhen Intermediate People's Court of Guangdong Province for operating an underground money house in the mainland for illegal business operation.
Since 2009, virtual currencies such as "Bitcoin" and "Darkcoin" have emerged on the Internet, driving a global virtual currency investment boom. In June 2014, Hong Kong resident Liu Xiong (handled in another case) smelled a "business opportunity" and approached Du Ling to discuss the establishment of an online platform similar to "Darkcoin", hoping that she would work with him to develop this "way to make money". Du Ling readily agreed and immediately began to promote the market and develop members.
According to Du Ling's confession after the incident, she took Chen Shurong, Hua Jinhe and others to discuss the details of creating the platform with Liu Xiong, and several people were well aware of the pyramid scheme. In August 2014, they hired people with a large sum of money to create the "Darkcoin" official website, create an online trading platform, and start the operation of the website. In order to support the fake "Darkcoin" investment, Liu Xiong, Du Ling and others established Dakang Intelligent Technology Co., Ltd. (hereinafter referred to as "Dakang Company") in Hong Kong. Of course, this fake "Darkcoin" website established by Liu Xiong and others has nothing to do with the real "Darkcoin". It just uses the reputation and value of "Darkcoin" to promote it in order to confuse the public.
After the establishment of Dakang, Chen Shurong, as one of the main market leaders, often took some people to the company's headquarters in Hong Kong for inspection and study. At the headquarters, consultants would give lectures every afternoon, teaching concepts such as "virtual currency" and "dark coin" as well as market promotion skills. Whenever Du Ling met someone who was "unresolved", she would come out to meet them, using her reputation as a banker to win them over and help develop members. In order to expand its popularity, in January 2015, Dakang also held a launch conference in Hong Kong, receiving thousands of investors to "visit".
Dakang Company set up its headquarters in Hong Kong and also rented an office in Shenzhen to develop the mainland market. The defendant Deng Xianxiong recruited personnel from his hometown to handle bank cards and POS machines, and opened the bank card online banking transfer function to collect membership fees and withdraw cash. Later, more than 100 POS machines bound to some bank cards were distributed to the company's leaders in various regions, thus realizing the network interconnection of the entire organizational system.
In February 2015, the Xuzhou Public Security Bureau Quanshan Branch discovered that the fake "Darkcoin" website was suspected of organizing and leading pyramid schemes, and filed a case for investigation on March 1. On March 19, 2015, the public security organs arrested the defendants Du Ling, Chen Shurong, Hua Jinhe, Deng Xianxiong and others in Shenzhen, Guangdong Province.
The lawyers involved in the case were also taken to the legal net
The case involved a particularly large amount of money, and the crime was committed in a new form, with a wide geographical scope and a large number of people. It was also a highly intelligent crime, which brought considerable difficulties to the characterization and evidence collection of the case. The Xuzhou Quanshan District Procuratorate attached great importance to the case and selected experienced backbone forces from the investigation and supervision and public prosecution departments to form a case-handling team to intervene in advance and guide the investigation. They discussed many times the basic structure and operation mode of the pyramid scheme activities, the basic situation of the criminal suspects who had been brought to justice, the existing evidence, and the continued investigation. During the early intervention period, the case-handling team started with verbal evidence and guided the public security organs to collect evidence by retrieving online chat records, sorting out the network personnel structure diagram, and retrieving bank transaction records, and required the public security organs to make comprehensive corrections in the form of electronic evidence.
During the work, the investigation team found that the person in charge of accounting at the backend of the website was not a professional accountant, and his account records were different from those of general accounting, and some of the contents could not be verified clearly. For this reason, they suggested that the police officers in charge of the case go to Shenzhen again to check the vague accounts in the seized computers in detail. After the public security organs sorted out and verified the backend information, they confirmed that there were 31,395 offline member accounts under the backend account of Chen Shurong's website, 7,023 offline member accounts under the backend account of Huajinhe's website, and 51 offline member accounts under the backend account of Deng Xianxiong's website. All three of them illegally obtained the income from developing members, which provided a strong basis for the case audit report.
On May 3, 2015, the Quanshan District Procuratorate accepted the documents and case files for reviewing the arrest of Du Ling and others for the crime of organizing and leading pyramid selling activities. During the case review process, a lawyer named Ni Wenwu came into the field of vision of the prosecutors handling the case. After investigation, Ni Wenwu was the market leader of the pyramid selling organization in Xuzhou. He organized and coordinated the development of the member team in Xuzhou, and gave lectures in Xuzhou Hotel, Shengjia Building and other places. He also organized large-scale cocktail parties to promote Dakang Company and "Darkcoin". The prosecutors handling the case also found that Ni Wenwu had more than 740 offline member accounts under the website backend account, and directly or indirectly collected 57 million yuan in pyramid selling funds paid by pyramid selling participants, which was a serious case. Subsequently, the Quanshan District Procuratorate issued an "Opinion on the Arrest of the Criminal Suspect" to the public security organs in accordance with the law, and successfully arrested the criminal suspect Ni Wenwu.
Step-by-step exploitation reveals the true face of pyramid schemes
According to the prosecutor handling the case, the difference between this case and traditional pyramid schemes is that Dakang's "Dark Coin" remuneration method is divided into two types: static income and dynamic income. Static income is the so-called mining income, which is directly distributed by the website system according to the level of the member account. Members are divided into three levels according to the purchase account, namely V1, V3 and V9, which require 1,000, 3,000 and 9,000 Dark Coins respectively. The payment fee is based on the real-time price of Dark Coin multiplied by the number of coins. The corresponding account amounts of V1, V3 and V9 are approximately 15,000, 45,000 and 135,000 yuan, respectively. The high membership fee is staggering. V1 members can get 4 to 7 Dark Coins per day, V3 members can get 14 to 21 static coins, and V9 members can get 63 to 87 static coins. If we follow this rule and exclude the price fluctuations of "Darkcoin", V1 members can get their money back through static coin distribution in 6 months, V3 members can get their money back in 5 months, and V9 members can get their money back in 4 months.
If static income is the gimmick of Dakang Company to attract members, then dynamic income is the driving force for each member to develop downlines. The setting of Dakang Company's website requires that each member can only develop three lines, that is, three zones. Registered old members can place new members directly under themselves, and if the line is full, they can continue to place them under downline members. The system adds up the number of dark coins statically allocated to members in the three zones as the overall performance of the zone, and divides them into large zones, middle zones and small zones according to the total amount. Then, dynamic distribution is carried out according to the principle of "no reward for the performance of the large zone" and "the income of the middle zone and small zone of members with different levels of accounts is distributed in different proportions".
The prosecutor explained that the website actually develops participants and then requires the developed members to continuously develop new members to join, thus forming a relationship between the upper and lower lines, and the upper line remuneration is calculated and paid based on the number of people developed by the lower line. This is the so-called "the more people you pull, the more benefits you get" in traditional pyramid schemes. In addition, according to the website's dynamic profit rules, members must continuously develop members and place them in their own middle and small areas, because only by keeping their three areas balanced can they obtain the greatest benefits. Newly developed members can only be placed down layer by layer, constantly forming a hierarchy. In order to get rebates, old members can only continuously develop members, thus presenting a "pyramid-shaped" structure with a large base and a small tip.
As of March 2015, Dakang Company had been actively recruiting members, with a total of 34,365 member accounts registered across the country. The membership fees paid by members also flowed into Dakang Company's account like a snowball. Before the case, Dakang Company received 20 to 30 million yuan in funds every day, and the total amount involved in the case was nearly 1.5 billion yuan.
They all called themselves "victims" in court
During the trial, the defendant Du Ling argued that Liu Xiong was the founder of Dakang Company, and that she was not his ally or partner. Moreover, Liu Xiong was engaged in real estate business and had industrial projects. She also transferred 130 million yuan of Dakang Company's funds into Liu Xiong's Hong Kong or Fiji accounts as an investment, claiming that she was also a victim. The most surprising thing is that while Du Ling, Chen Shurong, Hua Jinhe, and Deng Xianxiong claimed that they "did not understand" "Darkcoin" and virtual currencies, they did not think that "Dakang Darkcoin" was a pyramid scheme, but an internationally popular "Darkcoin" investment and operation behavior. The defendant Ni Wenwu was a professional lawyer. Before he came into contact with Dakang Company, he had also been paying attention to virtual currency investments such as "Bitcoin". Ni Wenwu said that he had always believed that Dakang Company had an operating entity, and that the virtual currency transactions it operated were international "Darkcoin" transactions. He was the real victim, and while "losing all his money", he stood in the defendant's seat that he was familiar with but unfamiliar with.
After the first round of court debate between the prosecution and the defense, the court concluded that the main focus of the dispute between the two parties was whether Dakang's "Darkcoin" business model was an illegal pyramid scheme, whether the defendants constituted the crime of organizing and leading pyramid schemes, whether the defendants were co-offenders, the legal basis for determining the amount involved, whether some of the defendants were accomplices in the crime, and whether they had meritorious service, etc. After that, the prosecution and the defense debated on the focus of the dispute.
The prosecutor used sufficient and solid evidence to prove three points in the prosecution opinion and court debate: First, the business activities of Dakang Darkcoin website are essentially pyramid selling activities. The business form of Dakang Company's website is deceptive, and the dark coins it operates are not real dark coins in the world. Dakang Darkcoin Company has no real investment. The dark coins generated by the website are actually just numbers on the website, and the price can be controlled by computer. In terms of remuneration, the number of developed personnel is directly or indirectly used as the basis for remuneration or rebates, and only by developing members layer by layer can rebates be obtained. Second, the number of people involved in pyramid selling activities within the organization is more than 30 and the level is more than three, which is far beyond the prosecution standard. Third, the defendants Du Ling, Chen Shurong, Hua Jinhe, Deng Xianxiong, and Ni Wenwu should be identified as organizers and leaders in Dakang Darkcoin network pyramid selling activities. Several people participated in the early initiation, planning and manipulation of Dakang Darkcoin network pyramid selling activities to varying degrees, and promoted and trained members, and they were all early members of the website. The first instance court finally recognized the opinion of the prosecutor.
Post-case statement Zhang Xiaodan, prosecutor of the Quanshan District Procuratorate of Xuzhou City, Jiangsu Province In 2013, the skyrocketing price of "Bitcoin" shocked the world, and many investors became rich overnight. Although many people do not understand the unique way virtual currency is generated and the trading logic, the myth of making money has stimulated more and more people to flock to the world of virtual currency, and some lawless elements have an opportunity to take advantage of it. "MLM coins" such as "Dakang Dark Coin" that use fashionable elements such as the Internet, new finance, and investment and financial management have entered people's field of vision. But no matter how beautifully the criminals package it, they cannot cover up its true face of pyramid schemes. As in this case, it not only seriously disrupts the economic and social order, but also damages the interests of the people and affects the harmony and stability of society.
Some of the five defendants were once the "queens of underground banks" and some were lawyers who used legal weapons to seek justice for others. However, no matter how glamorous and enviable their pasts were, they eventually indulged in greed and went down a road of no return. In this materialistic society, the pursuit of wealth has become the only pursuit for some people, but wealth requires one's own wisdom and hard work to create, rather than getting it for nothing. Collecting money by harming others for personal gain, disregarding moral constraints, and even violating the bottom line of the law will not work.
Buffett's saying "Don't play if you are not familiar with it, don't touch if you don't understand it" has always been regarded as a criterion in the investment field. Facing the seemingly novel virtual currency financial management project "Dakang Darkcoin", we should also maintain this attitude. There is no shortcut to get rich overnight in the world, don't believe that pie will fall from the sky. Only by keeping your eyes open, trying to distinguish the true from the false, and avoiding blindly following, can you prevent your life-long savings from turning into nothing.
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