Pyramid schemes are like a bottomless pit; once your money is gone, it never returns

[2] Compiled from: Jining Intermediate People's Court
 
Case review
 [3] A company in Yutai County, Shandong Province, purchased negative ion glasses and health food products from external sources, affixed its own company labels, fabricated product functions, and sold them at inflated prices. Based on the number and levels of downline members recruited, the company set up rewards such as "Double Rebate Award," "Matching Bonus," "Leadership Award," "International Resale Award," and "Free Travel Award," enticing participants to recruit others and defrauding them of money. Audits revealed that the pyramid scheme involved over 800 million yuan.

 
 

[4] Defendant Wang led and organized the above pyramid scheme by participating in establishing and managing the company, procuring products, and recruiting and training personnel to promote the marketing model. Defendants Zhao and nine others, aware of the company's operational model, participated in its operation and management. Defendants Zhang and others, knowing the operational model, recruited downline registered members to raise their own levels and obtain more rebates. Among them, Zhang's downline reached 25 levels with 1,445 members.
 
 
The court of first instance
[5] Based on the criminal facts, nature, roles in the joint crime, and attitudes of confession and repentance of each defendant, the Yutai Court ruled as follows: Defendants Wang, Zhang, and 15 others were convicted of organizing and leading pyramid scheme activities and sentenced to fixed-term imprisonment ranging from one year and five months to ten years, along with fines.
 
[6] After the first-instance verdict, defendants Wang and Zhang appealed, arguing that the company's operations were based on a team commission model tied to sales performance, that they were unaware of the pyramid scheme nature, that the conviction for pyramid scheme crimes was invalid, and that if a crime was established, it should be considered a unit crime.
 
 
The court of second instance
The Intermediate People's Court of Jining City found after trial that the personnel of the involved company, under the guise of promoting commodities and business activities, illegally profited from fees paid by participants in pyramid schemes for purchasing goods, directly or indirectly using the number of people recruited as the basis for compensation or rebates, rather than a team-based compensation model based on sales performance; such illegal activities not only violate the national economic management order but also infringe upon citizens' property rights and social management order, and the actions of each defendant in the case were correctly identified as the crime of organizing and leading pyramid schemes. Although the involved company was registered and established, it lacked complete corporate bylaws and financial systems, and during actual operations, funds rarely flowed through the company's public accounts, instead being transferred through impersonated personal accounts or employee accounts. Considering the company's business model since its establishment and the distribution of illegal profits, it should not be deemed as a unit crime. The appeal was dismissed in the second-instance ruling, and the original judgment was upheld.

 
 

 
"Criminal Law of the People's Republic of China"
Article 224-1 [Crime of Organizing and Leading Pyramid Schemes]
Whoever organizes or leads pyramid schemes under the guise of promoting commodities, providing services, or other business activities, requiring participants to pay fees or purchase commodities or services to obtain membership, forming hierarchies in a certain order, directly or indirectly using the number of people recruited as the basis for compensation or rebates, inducing or coercing participants to continue recruiting others, defrauding property, and disrupting 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, the offender shall be sentenced to fixed-term imprisonment of not less than five years and shall also be fined.
 
 
[1] The author's perspective
Pyramid schemes are also known as "cults" in the economic field, with the main characteristics being "headhunting" and collecting "entry fees." They not only infringe upon the lawful property of the people and undermine social morality but may also induce criminal cases such as illegal detention and violent injury, and even trigger mass incidents, seriously affecting social harmony and stability.
 
Lawless elements, after careful planning, often use high returns and national policies as bait, making such pyramid schemes highly deceptive and easily triggering people's eagerness to get rich quickly. Then, criminals use the "dream of quick wealth" to cloak pyramid schemes in the guise of personal struggle, stimulating participants' enthusiasm and spiritual potential. Through lectures, they "brainwash" participants, causing them to lose a correct understanding of the nature of their actions. However, pyramid scheme business models aimed at defrauding money are doomed to be unsustainable, and the dream of getting rich through pyramid schemes will inevitably be shattered by reality.