Evolution of the Online Pyramid Scheme (AI Translation)

【周刊提前读】网络传销不断变种 罪与非罪困扰治理

[para. 1] On December 25, 2024, Ren Bo, the principal executive of Beijing Xueli Xingqiu Technology Co., Ltd., faced trial for organizing and leading a pyramid scheme at Xilinhot City Court in Inner Mongolia. This was the third court session following earlier hearings. The company aimed to create a "knowledge-sharing economic ecosystem" centered on their Xueli Planet App, which boasted around 1.7 million registered users prior to its shutdown, including over 180,000 paying members. However, the tiered membership and commission system faced scrutiny for its alleged similarities to pyramid schemes.

[para. 2] Ren Bo started with potential by initially focusing on electronic books and introducing a tiered membership sales model. Commissions ranged from 60-70% to sales, with profits from third-party advertising funneled back to users. The platform's growth incorporated a "Xueli Points" system, promising rewards linked to app engagement. Ren Bo envisioned a futuristic model associating economic and user corporate value sharing.

[para. 3] Challenges emerged with allegations of pyramid schemes. In July 2022, complaints accused the app of propagating misleading promises, such as earning while learning, with an underpinning hierarchy that primarily encouraged inviting others to join the scheme rather than actual content consumption. However, a Beijing authority investigation found no immediate legal faults later that year.

[para. 4] Investigations in Inner Mongolia escalated, leading to arrests in 2023, including Ren Bo, due to alleged pyramid scheme activities. The accusations highlighted a habitual structure where recruits were incentivized to draw in more members, primarily for financial gains rather than product or service use. The legal process accentuated ambiguities and lack of evidence, necessitating further investigation.

[para. 5] The prosecution against Ren Bo asserted that the Xueli Xingqiu platform unjustifiably structured its operations to favor recruitment-related compensations, directly violating pyramid scheme prohibitions. The extensive seven-tier user structure was highlighted, drawing attention to the deceptive income claims.

[para. 6] The defense countered, asserting genuineness of services and absence of deception. Ren Bo's team argued that the platform provided legitimate book video services and fair membership costs, categorically denying elements typically defining pyramid schemes. Witnesses shared experiences vibing with this perspective, positioning the platform's operations as typical commercial endeavors.

[para. 7] Regulation of pyramid schemes in China has witnessed significant evolution through dedicated legislative processes, ranging from comprehensive bans to stipulated criminal penalties focused on deceptive aspects of such operations.

[para. 8] The intricate legal backdrop detailed the delineation between fraudulent and non-fraudulent schemes, emphasizing approaches that reveal intentional deceit or unsustainable business operations common in pyramid schemes. New network-based scheme forms, driven by rapid technological advancements, remain under sharp scrutiny by authorities.

[para. 9] Insights from legal scholars suggested refining legal frameworks to distinguish nuanced criminal activities appropriately. Discussions extended towards conceptual clarity between genuine business strategies and fraudulent schemes, contemplating relatively minor charges for emerging forms of online pyramid models.

[para. 10] The trial of Xueli Xingqiu's executives, notably including Ren Bo, encapsulates an emblematic case of evolving digital pyramid schemes and regulatory responses. Further legal refinement remains critical to addressing the complexity and contemporary manifestations of these schemes in the digital era.