Zhang Ting and her husband's pyramid scheme involves 9 billion yuan, but revenue is less than 20 million?
[4] Compiled from: Red Star News
In December 2021, the Shijiazhuang Yuhua District Market Supervision Administration stated in a "Reply to a Verification Letter" that Darwei Company was suspected of using the internet to engage in pyramid scheme activities and had filed a case for investigation. The incident sparked widespread public attention.
On April 7, 2022, a former distributor of TST Secret revealed that the Baokang County Market Supervision Administration had found that from January 1, 2018, to July 2021, Darwei Company's main business revenue related to pyramid schemes was approximately 9.171 billion yuan, with main business costs of 5.646 billion yuan, actual expenses of 3.458 billion yuan, main business taxes and surcharges of 34.5829 million yuan, income tax expenses of 10.4636 million yuan, and a profit of 19.2799 million yuan. In September 2021, the Baokang County Market Supervision Administration imposed an administrative penalty on the operator of TST Secret.
According to the above source, the Baokang County Market Supervision Administration believed that the bonus system formulated by Darwei Company divided members into Blue Card members and Red Card members. Among them, Blue Card members were ordinary consumers, and the bonus system for Blue Card members complied with commercial practices and was not illegal.
However, the bonus system implemented for Red Card members of Darwei Company required recruited individuals to bring in others, forming an up-and-down line relationship, and calculating and paying rewards to the upper line based on the sales performance of the lower line. This behavior fell under the relevant provisions of the "Regulations on Prohibition of Pyramid Schemes" and constituted a pyramid scheme. As the initiator, organizer, planner, and manager of the pyramid scheme, Darwei Company constituted the illegal act of organizing and planning pyramid schemes.
Ultimately, Darwei Company was ordered to immediately cease its pyramid scheme activities, confiscate illegal gains of 19.2799 million yuan, and impose a fine of 1.7 million yuan. In total, it was penalized with 20.9799 million yuan confiscated and fined.
"Criminal Law of the People's Republic of China"
Article 224 bis
Crime of organizing and leading pyramid schemes
Whoever organizes or leads pyramid schemes under the guise of selling goods or providing services, requiring participants to pay fees or purchase goods or services to obtain membership, forming a hierarchical structure based on a certain order, directly or indirectly using the number of people recruited as the basis for calculating commissions 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.
Prohibition of Pyramid Schemes Regulations
Article 2
For the purposes of these Regulations, "pyramid schemes" refer to activities in which organizers or operators recruit personnel, calculate and pay remuneration based on the number of people directly or indirectly recruited by the recruited personnel or their sales performance, or require the recruited personnel to pay a certain fee as a condition for obtaining membership, thereby obtaining illegal profits, disrupting economic order, and affecting social stability.
[1] The author's perspective
It is noteworthy that within just over three years, Darway Company achieved revenue as high as 9.171 billion yuan, yet its profit was less than 20 million yuan. Based on currently available information, Darway Company primarily deals in cosmetics and skincare products, with main business costs of approximately 5.6 billion yuan, referring to necessary costs such as production and research and development. Due to the company's pyramid scheme model, such as using celebrity endorsements, holding meetings, conducting training, and placing advertisements, the direct costs required for producing or selling products or services related to the main business, along with the massive funds needed to operate the pyramid scheme, resulted in related expenses reaching an astonishing 3.4 billion yuan.
Thus, it can be seen that the root problem of pyramid schemes lies not in the amount of profit, but in the fact that this unreasonable operational model disrupts the market economic order, causes property losses to the public, and its ever-expanding method of recruiting downlines tends to involve a wide range of people, severely impacting social stability and development.
From the above legal provisions, China not only has the specific "Regulations on Prohibition of Pyramid Schemes" targeting pyramid schemes, but severe cases also violate the Criminal Law, demonstrating the country's strong efforts to combat pyramid schemes. Despite this, pyramid scheme activities remain rampant in China, with repeated bans failing to stop them. In particular, this case involves celebrity couples leading the charge, with multiple celebrities endorsing it, resulting in faster spread, more deceptive methods, and a wider reach. Therefore, combating pyramid schemes is not only a necessary path to protect the vital interests of the people but also an inevitable requirement for maintaining social harmony and stability.
