Why do the public security often order pyramid schemes in criminal cases involving virtual currency?

In recent years, criminal cases of virtual currency have occurred frequently. One of the rules is that many currency-related cases are often filed by the public security organs as crimes of organizing and leading pyramid schemes. As the saying goes, there must be demons in abnormal things. Do circle practitioners like to play MLM or is there another secret? In this article, Lawyer Liu will take you to talk about this topic.

According to our team's many years of practical experience, the criminal cases involving virtual currency are generally classified as pyramid schemes because of the following two reasons:

0****1 Criminal cases involving currency are a bit difficult to handle

The difference between currency-related criminal cases and traditional criminal cases is that it has two attributes: "simple" and "complex":

"Simple" refers to the "9.24 Notice" ("Notice on Further Preventing and Dealing with the Risk of Hype in Virtual Currency Trading"). Biker, the bustling currency circle is full of high-rise buildings. At this time, currency-related cases, especially criminal cases, have not yet exploded. Even if there are cases that constitute crimes, they are cases with particularly obvious crimes (such as theft, fraud, etc.). The criminal case thinking model is used to handle the case.

"Complicated" means that after the "9.24 Notice", the country has launched a comprehensive attack from the aspects of market/finance/insurance/foreign exchange supervision, network security, judicial policy, etc., just like a singer throwing a "two-way foil" or "Snow wave paper", after the hustle and bustle of the currency circle calmed down immediately, civil disputes and criminal crackdowns broke out everywhere. At this time, the behavioral structure and business model in cases involving virtual currency have also undergone several years of evolution and iteration, and complex transaction models have emerged. It is difficult to give a direct and clear characterization in criminal law (such as NFT, DAO, etc.).

For civil lawsuits involving currency-related disputes, it is relatively easy to resolve; but for criminal cases involving currency, how to apply the current criminal laws and regulations is more controversial. The main controversies lie in the following areas:

**First, the value of criminal-related virtual currency is difficult to determine. **Because the conviction and sentencing of many criminal cases need to determine the specific amount involved, but the virtual currency has been deemed by the Chinese regulators to have no currency attribute, only the attribute of virtual commodity. The value of the virtual commodity is related to the major difference between crime and non-crime, this crime and that crime. In traditional criminal cases, the judiciary can fix the evidence on record and the amount involved through price determination by the competent department, judicial audit, and judicial appraisal. However, in criminal cases involving virtual currency, any of the above-mentioned solutions cannot be used. In current practice, the judiciary allows the suspect/defendant to entrust a third-party disposal company (the third-party disposal company is generally recommended by the judiciary) There are also huge legal risks in the disposal of virtual currency, which at least shows that the judiciary allows or even participates in the behavior of criminal suspects/defendants using third-party disposal companies to conduct batch transactions of virtual currency that are explicitly prohibited by the ten ministries and commissions of the country.

**Second, criminal cases involving currency are more complicated. **Most virtual currency criminal cases involve a large number of people, especially for cases where the project party is involved in criminal cases due to currency issuance. If it is issued and has the characteristics of hierarchical organization and rebates, it is very easy to be characterized as a crime of organizing and leading pyramid schemes.

The above is the reason why it is easy for the public security organs to define it as a pyramid scheme crime from the perspective of its own characteristics in currency-related criminal cases.

0****2 There are no victims in pyramid schemes, and the property involved in the case belongs to the state

From the analysis of the criminal composition of the crime of organizing and leading pyramid selling activities, there are two main reasons why this crime is widely adopted by the case-handling agencies in currency-related cases:

**First, the composition of this crime fits well with the model of currency-related criminal cases, and there are more connection points with the crime of pyramid schemes in the case of virtual currency involving the public. **As long as the currency is issued, it will inevitably involve publicity and promotion, and it will basically involve the method of profit or remuneration. At the same time, it is easy to form a hierarchical relationship in the process. Based on the path dependence in thinking, the case-handling agency first considers the crime of pyramid schemes. Even Lawyer Liu has encountered in practice that the police first file a case for organizing and leading pyramid schemes, and then the procuratorate approves the arrest or the police transfers it to the procuratorate. Changed to other charges, especially the crime of organizing and leading pyramid schemes is often "favored" by the public security organs.

**Second, there is no victim in the crime of organizing and leading pyramid selling activities, so ** there is no procedure for returning the property involved in the case. **The property involved in the case is in principle confiscated and returned to the state treasury. **Although the criminal law uses the expression "defrauding property" in the legal expression of the crime of organizing and leading pyramid selling activities, in the view of legislators, the participants of pyramid selling activities who are defrauded of property are not "victims" in the criminal law. Participating in pyramid selling activities Everyone in the organization has a certain profit-seeking mentality, so there is no such thing as returning property in pyramid scheme cases. On the other hand, this also proves why the case-handling agencies are motivated to investigate pyramid scheme cases, especially "rich" pyramid scheme cases.

In fact, in the past two years, in the criminal cases involving currency, especially in the cases of pyramid schemes involving currency, the profit-seeking law enforcement has always made the parties involved, defense lawyers, practitioners in the currency circle, and even some ordinary people feel dissatisfied with the case-handling agency. The main reason for trust. For example, in the financial fines and confiscation revenues of some cities in Jiangsu Province in the past two years, the "contribution" of currency-related criminal cases was more than 50% higher than in previous years.

0****3 Mankiw Attorney Suggestion

In the face of domestic virtual currency regulatory policies that are increasingly tightened (even to the ceiling), Attorney Liu proposes the following suggestions to entrepreneurs based on his experience in various criminal cases:

First, when your project can issue coins or not, be cautious about issuing coins. If you issue coins, you can temporarily choose to conduct compliance development overseas, but do not conduct business and publicity for citizens in China;

Second, if the currency is issued and publicized and promoted for users in China, it is recommended to isolate it according to the type of business (business in China must comply with the requirements of current laws and regulations, departmental regulations, regulatory policy documents, etc.). Do not engage in operations that are easily identified as pyramid schemes, such as head-grabbing and rebates, dissemination of fission, etc. in the course of business development;

Third, once you are involved in criminal charges, filing a criminal case, etc., you should consult a professional lawyer as soon as possible to avoid the passive situation of blindly pursuing new business models while ignoring the strict supervision of the temple. Remember not to be superstitious about finding so-called "acquaintances and capable people" to settle criminal cases, which will affect the timing of lawyers' intervention in the investigation stage, making it difficult to advance follow-up cases according to law.

The world of Web 3.0 is actually very big, and there are many things that can be done, but the risks of issuing virtual currency in the territory must be recognized. Only in this way can we sail steadily in the world of Web 3.0.