Lianyungang cracked a major "U-coin" online pyramid scheme case

     Recently, the Lianyungang police in Jiangsu Province announced that after more than four months of meticulous investigation, the "10.10" major online pyramid scheme case, which was supervised by the Economic Investigation Bureau of the Ministry of Public Security and was No. 1 case in 2015, was solved.

     This new type of foreign-related online pyramid scheme used so-called "U-coins" for trading, attracting 220,000 registered members from 23 countries, with the amount involved reaching 500 million yuan. At present, 12 senior members of the pyramid scheme, including two Malaysian suspects, have all been arrested, the funds involved in more than 40 bank accounts have been frozen, and the main criminal suspect has been transferred for prosecution.

A new type of pyramid scheme using "U-coins" for buying and selling

     In September 2014, a citizen reported to the Economic Investigation Brigade of the Lianyungang Public Security Bureau that he heard Wang Ying, Wang and others introducing the audience to invest in virtual currency "U Coin" in a coffee shop in the city. "The more I listened, the more I felt something was wrong, so I asked the police to find out," said the citizen.

     This conversation attracted the attention of the police, who later found clues that the two people mentioned above were actively developing downline members to engage in pyramid scheme criminal activities in the name of using the Internet to invest in the virtual currency "U Coin" of Thailand's Youqu Group.

What is “ U-coin”? What kind of organization is Thailand’s U-Qu Group?

     "The police found that since 2014, Thailand's Youqu Group has set up a website overseas, claiming that RMB can be exchanged for US dollars at a ratio of 7:1, and used to purchase the virtual currency 'U-coin', which can be invested, increased in value, transferred, and cashed out, and investors can obtain 30% to 40% appreciation every year." The case organizer, Captain Zhang of the Third Brigade of the Economic Investigation Detachment of the Lianyungang Public Security Bureau, told reporters that the pyramid scheme organization publicly advertised online that investing in "U-coin" can make huge profits, and deceived investors to pay different amounts of US$500 to US$50,000 to register as members, and obtain the qualification of one-star to five-star members, and these membership fees can be converted into "U-coin". At the same time, the superior-subordinate hierarchical relationship is formed according to the order of joining, and through the establishment of bonus forms such as recommendation awards, matching awards, and leadership awards, members are encouraged to develop downline members in the offline way of "pulling people" to obtain high rebates of 7% to 12%. The more downlines are developed and the larger the amount, the more commissions are obtained.

     Some early members did make a profit, which led to more and more people hoping to make a lot of money getting involved, including some highly educated people such as university teachers, civil servants, and financial workers. In order to prevent the capital chain from breaking, the organization set rules in the cash-out process, that is, a high "handling fee" must be paid, such as the exchange rate from US dollars to RMB is only 1:6, in order to encourage everyone to hold for a long time.

     The police officers in charge of the case found that the pyramid scheme required members to transfer the investment funds to the bank card of the upline members who were responsible for placing orders when joining. The upline members would then transfer the funds to the bank accounts controlled by overseas pyramid schemes step by step to purchase "U coins".

There are 36,000 registered members in 31 provinces in China

     After analysis and judgment, the Lianyungang police in Jiangsu Province believe that the network organization of Youqu Group is very mature and covers a wide range of regions. At the same time, it is very obvious that it is suspected of pyramid selling crimes by developing downlines. "We started with two local people in Lianyungang, followed the clues to find their upline in Henan, and found that the latter's upline was overseas. The organization is complex and has a large number of people." Captain Zhang said.

     The reporter learned that the Lianyungang Public Security Bureau officially opened an investigation in October 2014. The police officers in charge of the case traveled to more than 10 cities including Guangzhou, Shenzhen, Beijing, Zhengzhou, and Xinxiang for more than four months, covering a distance of 15,000 kilometers. They checked more than 2,600 accounts involved in the case in Guangzhou and other places, printed paper transaction bills weighing a total of 150 kilograms, and unearthed a huge criminal fund operation system.

     During the investigation, the police also found that in order to evade sanctions, the organization borrowed other people's accounts to open multiple accounts to transfer the funds quickly in and out in real time, in order to conceal itself and evade investigation.

     "This case involves 220,000 registered members from 23 countries including China, Thailand, Malaysia and other countries, and as many as 36,000 registered members from 31 provinces, cities and districts in China. If it is not eliminated in time, it is estimated that it will continue to develop." Captain Zhang admitted that due to the complexity of the case, the large number of people involved and the wide range of regions involved, the Economic Investigation Bureau of the Ministry of Public Security attached great importance to the case after being reported at all levels, and listed the case as the No. 1 supervision case of the Economic Investigation Bureau of the Ministry of Public Security in 2015 and tracked and guided it throughout the process.

     Since the organization has a long chain and close connections, once the news leaks, the suspects will destroy evidence and flee the country, so it is imperative to close the net in multiple places at the same time. On January 10, 2015, the Lianyungang police mobilized nearly 100 police officers to form several arrest teams and went to Guangzhou, Shenzhen, Zhengzhou, Baoding and other places to prepare for the arrest.

     At 2 p.m. on January 14, based on the command issued by the headquarters, the arrest team captured 12 senior members of the pyramid scheme, including Yan Mouchao, including two Malaysian suspects, and successfully froze the funds involved in the case in more than 40 bank accounts within an hour.

Network pyramid schemes are more deceptive in the guise of technology

     In fact, almost all the "upper level" of the organization knew that this was a scam, but they profited by entering first, making money first, and exiting first. The real victims were those who joined later. So, what are the characteristics of this kind of pyramid scheme that have caused so many people to fall into it?

     "This new type of pyramid scheme crime has the characteristics of low threshold, networking, internationalization, and concealment. At the same time, it is covered with a seemingly technical cloak, which is very confusing and deceptive." Captain Zhang told reporters that unlike previous face-to-face, concentrated pyramid schemes, this case uses the Internet, with relatively scattered members and relatively covert activities. In addition, many of the people involved in the case have participated in pyramid schemes before and are experienced in developing downlines and promoting them. They take advantage of the fact that ordinary people do not understand the profession, lack judgment, but want to invest to make a profit, and make them mistakenly believe that this is the same as investing in stocks, gold, futures, etc., and they fall into the trap one after another, and even drag their relatives and friends into it.

     According to the case officers, investors' expectation of high returns and lack of professional and rational judgment have indulged the criminals' profiteering and fraudulent mentality. In the current information society, especially under the pressure of economic downturn, more and more people are seeking diversified investment channels, which are the soil for the survival of pyramid schemes. In the process of collecting evidence, the police found that many investors joined because they did not understand the situation and gradually became "accomplices" of criminal organizations.

     "During the investigation, we found that the senior executives of the pyramid scheme organization had a strong anti-investigation awareness. They called each other by pseudonyms and used WeChat and other online communication tools to contact each other. This is also a new type of pyramid scheme crime." Captain Zhang introduced that under the situation where the country is severely cracking down on pyramid scheme crimes, many pyramid schemes have adopted transnational crime methods, setting up their headquarters abroad, developing downlines in China, core personnel do not easily enter the country, and using new technical means to commit crimes, which has brought great difficulties to the case handling work.

The police remind that when you encounter an investment project with outrageous returns, you must remember that "there is no such thing as a free lunch". In particular, if it claims that you can get high returns by developing downline personnel, it can basically be judged as a pyramid scheme crime. Investors should pay attention to choosing formal investment channels. If you are unsure, you can consult professionals or seek help from the police in time to avoid losses.