The Shanghai task force investigated and dealt with 5 major branches, including "free travel" and "lying down to make money"? New types of online pyramid schemes target "silver haired individuals"

Inviting middle-aged and elderly people to "travel for free", recommending investment and financial management software during the period, attracting them to "invest" in their pensions, claiming that consumption can be rebated, and becoming a "senior member" can "lie down and make money"

In September 2022, the Yangpu Branch of the Shanghai Public Security Bureau cracked a case of enticing middle-aged and elderly people to commit pyramid schemes. This case involved 350000 people nationwide, including more than 270000 people aged 50 and above. At present, the procuratorial organ has decided to prosecute the main suspect of the case for the crime of organizing and leading pyramid selling activities according to law.

How did pyramid schemes induce so many middle-aged and elderly people to become deeply involved? Xinhua Vision reporters conducted an investigation.

The gimmick of "free travel" lures middle-aged and elderly people

In the spring of 2022, 56 year old IT industry practitioner Chen participated in a "free trip" recommended by an old friend. At a farmhouse in Taizhou, Zhejiang, he dined with people from all over the country, and on stage, someone told an inspirational story of his dream of becoming rich coming true.

"Our company has developed a 'facial recognition payment' software that allows customers to receive rebates as long as they make purchases. According to the staff on stage, this software called 'NetLianJia' is a fourth party payment platform that integrates e-commerce and new consumer experiences, with daily revenue and cash flow.".

According to the so-called "reward mechanism", as long as you recharge as a member and continuously recommend others to recharge, you can receive high returns, which is known as "direct referral rewards"; At the same time, the extension of each level among the recommended individuals will also generate corresponding benefits, known as "inter referral rewards".

What confuses Chen is the concepts they have proposed, such as "digital blockchain" and "enterprise digital transformation", which sound very "mysterious". So, he recharged 50000 yuan to upgrade to a regional agent, "so he can get high rebates." More and more people were involved in it.

A few months later, the company located in a commercial building in Wujiaochang, Yangpu District, Shanghai, was found abnormal by the police due to frequent entry and exit of middle-aged and elderly people, and an investigation was launched.

These middle-aged and elderly people are attracted by gimmicks such as "free travel" and "one yuan exchange for gold jewelry" to come for consultation, thus falling into the trap of pyramid schemes. Due to the promised return rate of this company being much higher than that of ordinary investment and wealth management products, many middle-aged and elderly people have invested in their pensions under the hype of corporate promotion and other referrals.

In order to prevent more people from falling into pyramid schemes, under the guidance of the Economic Investigation Brigade of the Shanghai Public Security Bureau, the Yangpu police have mobilized elite police forces to establish a special task force, which has sorted out more than 100000 fund flows and more than 5 million data, and comprehensively collected evidence of the gang's criminal activities.

In September 2022, the task force arrested a total of 16 members of the gang led by Cao Moudeng, investigated and dealt with 5 headquarters and branches engaged in pyramid schemes, and cracked down on the entire chain from "backend development" to "front-end operation".

"Middle aged and elderly people make up the vast majority," said Jin Li, a police officer from the Economic Investigation Detachment of the Yangpu Branch of the Shanghai Public Security Bureau. Criminal gangs have specifically designed phrases such as "unleashing surplus value" and "stable sideline work" targeting middle-aged and elderly people, and have launched gimmicks such as "free travel and free diagnosis and treatment". Middle aged and elderly people, due to their low vigilance, lack of life information, and absence of their children, are easily targeted by criminals for infringement.

Large architecture, strong concealment, and extremely confusing

After examination, the suspect Cao Moudeng registered to establish Shanghai Juyingke Digital Technology Co., Ltd. under the guise of promoting the "face brushing payment" software "Netlink Jia", luring middle-aged and elderly people to pay membership fees, and developing offline members to recharge at all levels, so as to organize and lead pyramid selling activities.

Compared to the offline dissemination of traditional pyramid schemes, the dissemination channels of online pyramid schemes have shifted towards online forms such as social software, live teaching, and video conferences, and pyramid schemes have shifted from physical products to virtual and digital products; Its dissemination mode is more complex, the scope of dissemination is wider, it affects more regions, develops faster, and has greater social harm.

——With the development of the Internet, pyramid schemes have more levels and more complex structures.

Through the fission promotion and marketing of the Internet, "Netlink Jia" has grown rapidly and its members are all over the country. As of the incident, there were over 350000 participants who registered with real names and paid membership fees.

Jinli introduced that "NetEase Jia" claims that after paying membership fees ranging from 198 yuan to 250000 yuan for six levels of members, as long as they continuously recommend to others to download and recharge, they can receive up to 40% to 75% of development offline rewards. After investigation, "NetEase Jia" has a maximum development level of 32 levels, with a capital flow of 850 million yuan, and the majority of its revenue comes from membership fees.

"The obvious characteristics of online pyramid schemes include paying entry fees, developing downlines, and implementing multiple payment methods," said Lin Zhi, deputy commander of the Seventh Brigade of the Economic Investigation Brigade of the Shanghai Public Security Bureau. "NetLianJia" does not have any physical business projects or industries, and its essence is to attract middle-aged and elderly groups to pay fees through high rewards and continuously "attract people" to develop downlines. It is a typical gang that uses pyramid schemes as a means of committing crimes.

——Fuzzy hierarchical concepts and covert payment methods are used to evade supervision and investigation.

After arriving at the case, Cao Moudeng confessed to the police that the funds recharged by members were directly deposited into the company's account and were not subject to third-party supervision. The company also has no physical business operations, and the so-called rewards received by a few members are actually the membership fee sharing paid offline; The so-called profit sharing refers to the commission sharing of each transaction by members.

The organizers of online pyramid schemes, in order to evade supervision and cover up criminal activities, will try their best to disguise themselves, and even hire professionals who are proficient in company operations and financial knowledge to design pyramid schemes hierarchical models, develop more covert payment models, and make the concept of hierarchy more vague to evade supervision and investigation.

"On the surface, 'NetLianJia' does not display its hierarchy to the outside world, and the profit making methods of its members are not directly linked to the number of new recruits." Jin Li said, in fact, in the operation mode of 'NetLianJia', higher-level members can obtain profits through offline development of members, indicating the existence of a substantive hierarchical relationship.

——There are numerous names and innovative designs, which are more deceptive and confusing.

The new types of online pyramid schemes have numerous names and are highly confusing. Jin Li introduced that criminals, in the name of e-commerce, virtual currency, consumer rebate, health care, etc., often distort popular concepts such as digital currency, blockchain technology, meta universe, and Internet finance to confuse the public, which poses great challenges to curb such crimes.

In addition, building a pyramid scheme website is technically simple and highly replicable, allowing criminals to operate multiple online pyramid schemes simultaneously. "They are familiar with criminal techniques and the speculative psychology of participants, constantly innovating and adding difficulty to the police's crackdown," Lin Zhi said.

Enhance the level of defense and strengthen the prevention at the source

In order to further curb the development and spread of online pyramid schemes, effectively safeguard national economic and financial security and the legitimate rights and interests of the people, the Ministry of Public Security has recently deployed a concentrated crackdown on online pyramid schemes, with a focus on major livelihood issues and new types of online pyramid schemes under the banner of major policies. Efforts have been made to identify a number of criminal clues, investigate and punish a number of major cases, completely eliminate a number of national and regional pyramid schemes, and severely punish a group of criminals, effectively forming a strong deterrent effect.

The Shanghai Public Security Economic Investigation Department relies on the new modern policing mechanism to dissect the "sparrow case", analyze the "model case", summarize and extract the characteristics of the crime, actively sort out and discover case clues, strengthen source prevention, timely discover and cut off the transmission channels and chains of online pyramid schemes, and continuously improve the level of prevention and control.

The relevant person in charge of the Economic Investigation Bureau of the Ministry of Public Security stated that the public security organs will actively respond to new types of online pyramid schemes, further innovate their thinking, take multiple measures, and focus on cracking down on key areas of pyramid schemes; Strengthen the coordination and linkage with departments such as cyberspace and market supervision, as well as financial institutions, enhance the ability to prevent risks of new types of online pyramid schemes, and maintain a strict crackdown on illegal and criminal activities related to pyramid schemes.

While relevant departments destroy the pyramid scheme organizational system in accordance with the law, the public should also raise awareness of prevention and compliance with the law.

"Capital operation, consumer rebates, original stocks, recommendation awards, high returns, etc. are common terms in pyramid schemes and must be kept vigilant. Most pyramid schemes are money making games that 'divide online and offline investment funds', and behaviors such as' income gate fees' and' pulling offline 'should be highly vigilant. Lin Zhi reminds that middle-aged and elderly people must carefully distinguish investment projects to prevent being deceived by illegal investment activities under the guise of so-called national policies, benefiting the people, and charity mutual assistance. Do not blindly follow the trend and blindly pay for them.".