According to Odaily, the Supreme People's Court and the State Administration for Market Regulation in China have jointly released five typical cases of legally punishing online pyramid schemes. One of these cases involves a fraudulent investment promising high returns through 'virtual currency'.
In early 2018, the defendant, identified as Chen, and others used blockchain as a gimmick to set up a 'Token' online platform to carry out pyramid selling activities. Participants were required to obtain the platform's membership account through online referrals and pay a virtual currency worth more than $500 as a threshold fee to receive value-added services. They could use the platform's 'smart dog brick-moving' technology to carry out arbitrage trading in different trading venues and obtain platform income.
To evade crackdown, Chen and others moved the platform's customer service group and coin-dialing group abroad in January 2019 and continued to carry out pyramid selling activities with the 'Token' online platform. According to statistics, the 'Token' online platform registered more than 2.6 million member accounts, reaching 3293 levels, and collected more than 9 million various virtual currencies paid by members, including Bitcoin, Tether, and EOS.
The People's Court of Yancheng Economic and Technological Development Zone in Jiangsu Province sentenced Chen to eleven years in prison and a fine of six million yuan for organizing and leading pyramid selling activities. The remaining defendants were sentenced to imprisonment ranging from eight years and eight months to two years, and fines were imposed. The illegal gains were recovered and confiscated, and turned over to the state treasury. After the first-instance judgment, Chen and others appealed. The Intermediate People's Court of Yancheng City in Jiangsu Province ruled to reject the appeal and uphold the original judgment.
The People's Court, based on the position and role of the organizers and leaders of cross-border online pyramid selling activities in the entire crime chain, imposed corresponding penalties and legally confiscated the involved Bitcoin and other virtual currencies. This cut off the defendant's economic ability to commit cross-border crimes again, demonstrating the judicial authorities' determination to defend internet financial security and maintain the stable and healthy development of the financial market.