On July 12, 2024, the 9th issue of “Criminal Defense Semi-Monthly Talks” on “Key Points of Defense for MLM Crimes and Business Model Compliance Plan” organized by the Criminal Department of King&Capital Law Firm was successfully held, hosted by Wang Xinlong, senior partner of King&Capital, and lectured by Yin Bo, professor and doctoral supervisor of the School of Criminal Justice of China University of Political Science and Law. Mr. Niu Xingli, senior partner of King&Capital, and Mr. Changsha, partner of King&Capital, talked with us.
Mr. Yin Bo believes that the defense of cases involving pyramid schemes needs to be clear first of all about its widespread high incidence and the difficulty of acquittal defense, with certain incentives for the business model of the enterprise is ubiquitous, such enterprises are in violation of the “Regulations on the Prohibition of Pyramid Schemes” and even the risk of the relevant provisions of the Criminal Law, and in the experience of the criminal prosecution of the successful acquittal of the defense of very few. The defense work should focus on the work of the enterprise behavior is purely fraudulent acts or with the business behavior, whether the party is in the lower level can be determined does not constitute the main offender, the party if the main offender can also be identified as the primary elements, backbone members, other major role in the members of the differentiation, as far as possible to reach an effective reduction in the sentencing of the defense effect. Yin Bo also pointed out that, with the social e-commerce has become an emerging field, to do to knock down the tier model, stripping the multi-level benefit accrual model, build the platform overall compliance system, through the prior compliance rectification in order to better protect the parties.
NiuXingLi lawyers from their own case experience, that the criminal law amendments to clarify the criminal composition of pyramid schemes, purely on the company's operating model design is difficult to break through the organization, leading pyramid schemes crime, in practice, can not produce the effect of the defense. NiuXingLi lawyers to handle the network marketing crime as an example, through the network marketing activities seem to circumvent the traditional type of marketing crime often include illegal detention and other circumstances, but pulling members to develop downline, the establishment of non-existent physical commodities network shopping malls, members of the multilevel separation, etc. behavior is still recognized as a pyramid scheme of risk. Niu Xingli lawyers believe that, in the network marketing crime scenario, through the network evidence to identify the tandem downline personnel and rebate situation, is ultimately determined to constitute the crime of organizing and leading pyramid schemes, but also the core points of the defense.
Mr. Changsha started to talk about the famous case of TST founded by Zhang Ting and Lin Ruiyang, and introduced the possible legal consequences of the problematic design of the company's structure, starting from the risk-avoidance thinking in the design of TST's structure. Mr. Changsha pointed out that Mr. and Mrs. Zhang Ting's main business in China, Dalway, has several overseas shareholders, through the design of limited liability company, effectively limiting the possible legal liabilities, Dalway's two-tier hierarchical design of the members, but also circumvent the law clearly stipulates the three-tier pyramid scheme model identification. If there are flaws in the design of the company's business model, it may face two main legal consequences, one being the possibility of penetration after the revision of the Company Law in the way Zhang Ting and his wife used the holding design to circumvent the legal risks at the level of the Company Law, and the other being the criminal legal risk of being prosecuted for the crime of organizing or leading pyramid schemes related to pyramid schemes, both of which require attention.
In the process of hosting the seminar, Mr. Wang Xintong introduced the legal provisions related to the crime of pyramid selling in conjunction with the revision of the Regulations on Prohibition of Pyramid Selling and the Regulations on Administration of Direct Selling and pointed out the reality of “strict legislation, general violation of law and selective law enforcement” in pyramid selling cases, and shared with the audience the skills of defending cases of pyramid selling and pointed out the urgency of improving the legal provisions related to pyramid selling and direct selling. He also pointed out the urgency of perfecting the relevant legal provisions on pyramid selling.
