The pyramid scheme hearing has concluded. Are Zhang Ting and Tao Hong not yet finished?
[4] Compiled from: Red Star News
On November 7, after four days, the hearing on the case of Zhang Ting, Tao Hong, and others suspected of online pyramid schemes concluded in Shijiazhuang, Hebei Province. The case has not yet reached a verdict.
Notably, a key whistleblower at the hearing was Ms. Li, whose husband, Zhu, was a former agent of the brand "TST Secret." He was sentenced to seven years in prison for a criminal case related to "TST Secret."
Case review
In November 2020, while purchasing goods on the shopping software platform "Secret" under Darwin Company, Zhu discovered a loophole in the settlement process between the platform and Alipay. Simply put, canceling an order on the "Secret" platform but continuing to pay via Alipay would result in the transaction being deemed successful, while the cash vouchers on the "Secret" platform, which should have been consumed, were returned to the personal account due to the order cancellation.
After discovering this loophole, from November 2020 to January 2021, Zhu used multiple accounts and cash vouchers (worth about 20,000 yuan) to maliciously place 1,123 orders, actually paying 917,400 yuan but obtaining goods worth 5.6547 million yuan, illegally profiting 4.7163 million yuan.
After the case was uncovered, public security authorities seized 3,453 items of goods from Zhu and returned them to Darwin Company. Zhu's relatives compensated Darwin Company 1 million yuan on his behalf and obtained forgiveness.
The court ruled that Zhu, with the intent of illegal possession, defrauded 4.7163 million yuan during the process of signing and performing contracts (the contracts involved refer to goods purchase agreements), constituting the crime of contract fraud. After committing the crime, Zhu voluntarily surrendered and truthfully confessed his crimes, willingly admitted guilt and accepted punishment, and had already compensated Darwin Company 1 million yuan and obtained forgiveness, leading to a lenient sentence.
Ultimately, Zhu was sentenced to seven years in prison for contract fraud, fined 500,000 yuan, and ordered to compensate Dawei Company for the remaining economic losses.
"Criminal Law of the People's Republic of China"
Article 224 [Contract Fraud]
Whoever, for the purpose of illegal possession, commits any of the following acts in the course of concluding or performing a contract, thereby defrauding the other party of property in a relatively large amount, shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall also, or shall only, be fined; if the amount is huge or there are other serious circumstances, the offender shall be sentenced to fixed-term imprisonment of not less than three years but not more than ten years, and shall also be fined; if the amount is especially huge or there are other especially serious circumstances, the offender shall be sentenced to fixed-term imprisonment of not less than ten years or life imprisonment, and shall also be fined or have property confiscated:
(1) concluding a contract in the name of a fictitious unit or in the name of another person;
(2) using forged, altered, or invalidated bills or other false property certificates as guaranty;
(3) having no actual ability to perform, luring the other party into continuing to conclude and perform contracts by performing a small-amount contract or partially performing a contract;
(4) Absconding after receiving the goods, payment, advance payment, or collateral property given by the other party;
(5) Obtaining the property of the other party through other fraudulent means.
[1] The author's perspective
The Zhang Ting company pyramid scheme incident has been widely discussed for several years, yet no conclusion has been reached to this day. From product quality issues to agents reporting its business model as a pyramid scheme, various other cases have emerged. Although Zhu in this case is charged with contract fraud, unrelated to pyramid schemes, the definition of the funds involved is closely tied to whether Zhang Ting’s company is a pyramid scheme. If Zhang Ting’s company is indeed a pyramid scheme, its assets are not protected by law; if not, they are legally protected. Thus, whether Zhang Ting’s company is deemed a pyramid scheme is decisive for many related cases.
Since Zhang Ting’s company has not yet been officially identified as a pyramid scheme, with only the acceptance notice and case filing form from the Shijiazhuang Yuhua District Market Supervision Administration as evidence, and no supporting legal documents from relevant administrative or judicial authorities, the court in Zhu’s contract fraud case ruled that it cannot be concluded that Darwei Company is involved in administrative violations or crimes, nor can it be determined that its property rights lack legality. Not only are these two cases intricately connected, but many others are also awaiting the conclusion of Zhang Ting’s company case, as it concerns not only the social economy but also their personal interests.
