Case Analysis | AFTC coin issuer was prosecuted for alleged fund-raising fraud, and investor funds were refunded

Recently, the Yandu District Procuratorate filed a public prosecution against the issuer of the AFTC currency for the crime of fund-raising fraud.

The use of the concept of blockchain, the use of pyramid schemes, the use of virtual currency as a means of illegal fund-raising, has previously been characterized as the organization of leading pyramid sales activities (chain law team previously joined the chain and anti-transmission alliance, released under 2018 Half a year of the MLM report).

The AFTC currency is characterized as a fund-raising fraud, which means that the property seized, seized, or frozen (if any) may be returned to the fund-raising participants after the lawsuit is terminated.

Recently, both the CNNS and the Dimensional Website (DILI) were filed on suspicion of fraud. In fraud cases, investors who participate in the project may be identified as “victims”.

In view of the identity of the victim, reasonable measures to safeguard rights, and actively cooperate with the police to carry out investigations, it is possible to recover the losses, which should attract the attention of all investors.

On August 14, 2019, the People's Procuratorate Case Information Open Network published an indictment on a fund-raising fraud case in Yandu District Yandu District Procuratorate. The indictment showed that the defendant Fu Mou and Jiang Mou set up a virtual currency trading platform to issue AFTC coins. It has been suspected of constituting the crime of fund-raising fraud.

ICO, STO, IMO, IFO, IEO, the terminology of blockchain industry financing emerges in an endless stream. We have analyzed the legal issues involved in these financing activities in previous articles ("Chain Method Research | Why We Say" What O No, "!"), we believe that the essence of the various "O" is to absorb funds from the public, which is illegal under the current regulatory framework.

O1 case brief

The defendant paid a certain in March 2018 with Li and others (in another case) illegally set up a virtual currency AFTC currency trading platform on the Internet, speculating the concept of blockchain, issuing AFTC coins, and raising the value of the currency through background manipulation, externally to "AFTC International" In the name of Holding Co., Ltd., it promoted and promoted false temptations such as AFTC coins “only rise and fall” and “hold money”, enticing many investors to purchase AFTC coins.

The defendant Jiang knows that the AFTC currency is the defendant paying a certain person to establish a platform for issuance. There is a risk of collapse, resulting in the loss of investors in the later period. He is still actively participating in the promotion and absorption of funds as the leaders of the three markets, and has absorbed the victim’s flower, Qiu Moumou and others invested in the purchase of AFTC coins. On June 14, the same year, the defendant paid to close the AFTC trading platform.

After returning to the case, the defendant Fu Mou and Jiang Mou truthfully confessed their criminal facts. The defendant Jiang quit part of the levy of RMB 175,480 and returned it to the victim, and obtained the understanding of the victim.

The Yandu District Procuratorate believes that the defendant Fu Mou and Jiang Mou used the method of illegal possession, using fictional facts, concealing the truth, and illegally raising funds to the public. The amount was huge, and their actions violated the Criminal Law of the People’s Republic of China. Article 192 shall be investigated for criminal responsibility for the crime of fund-raising fraud.

O2 legal analysis
 
On August 24, 2018, the Banking Insurance Regulatory Commission, the Central Network Information Office, the Ministry of Public Security, the People's Bank of China and the General Administration of Market Supervision jointly issued the “Risk Prompt for Preventing Illegal Fund Raising in the Name of “Virtual Currency” and “Blockchain”, pointing out The so-called "virtual currency", "virtual assets" and "digital assets" are used to absorb funds and infringe on the legitimate rights and interests of the public. Such activities are not really based on blockchain technology, but rather the concept of speculative blockchain illegal fundraising, pyramid schemes, and fraud.

The criminals added the "blockchain-related concepts" to illegal fund-raising activities, and the crime of fund-raising fraud was a felony in illegal fund-raising crimes, and the suspects may face serious penalties.

What is the crime of fundraising fraud?
 
According to Article 192 of the Criminal Law, the crime of fund-raising fraud refers to the illegal use of fraud for the purpose of illegal possession, and the large amount is the crime of fund-raising fraud. The possession of "illegal possession purpose" is an essential subjective element of the crime of fund-raising fraud. If it cannot be determined that the perpetrator has subjectively "illegal possession purposes", then the crime of fund-raising fraud cannot be established.
What is illegal fundraising?
 
According to the Interpretation of Several Issues Concerning the Specific Application of Laws in the Trial of Criminal Cases of Illegal Fund Raising, promulgated by the Supreme People's Court in 2010, illegal fund-raising is an act of absorbing funds from the public (including units and individuals) in violation of national financial management laws.

In addition, illegal fundraising activities mainly have the following characteristics:

First, the funds are not absorbed by the relevant departments in accordance with the law or borrowed from legal operations;

Second, publicize the public through the media, promotion conferences, flyers, mobile phone text messages, etc.;

The third is to promise to repay the principal or pay the return in the form of money, in kind, equity, etc. within a certain period of time;

The fourth is to absorb funds from the public, that is, socially unspecified objects. The objective performance of these four aspects also shows the four characteristics of illegal fundraising crimes, namely illegality, openness, attractiveness and sociality.

In other words, from ICO to IEO, it is possible to be illegal fundraising.

In this case, the AFTC platform issued AFTC coins to induce investors to make purchases, which itself was illegal fund-raising. In addition to the use of fraud, and the purpose of illegal possession, the prosecution believes that it is suspected of raising funds for fraud.

How can an investor recover the investment if it is deemed to constitute a fund-raising fraud?
 
In the current indictment, it is mentioned that the criminal suspect Jiang has voluntarily returned the money and obtained the understanding of the victim, so the court will consider it when it is subsequently sentencing.

Since the case is tentatively identified as fund-raising fraud, how can the rights of subsequent fund-raising participants be guaranteed? That is, how do investors (victims) recover their investment funds?

What needs to be made clear is that as an investor (victim) of a fund-raising fraud case, it is impossible to bring a criminal incidental civil action and directly claim the right.

According to Articles of the Opinions of the Supreme People's Court, the Supreme People's Procuratorate and the Ministry of Public Security on Handling Criminal Cases of Illegal Crowd-funding (hereinafter referred to as "Opinions"):

In handling criminal cases of illegal fund-raising across regions, the case-handling organ handling agency shall promptly collect the property involved and do a good job in the unified disposal of assets. Other case handling agencies involved in the case shall promptly ascertain the property involved, clarify their source, whereabouts, use, and circulation, handle the procedures of seizure, seizure, and freezing in accordance with the law, and make a detailed list. A detailed account shall be established for the seizure, and shall be deposited immediately after the seizure. Enter the only compliance account of the case, and provide relevant information to the case handling agency.

After the people's court makes a judgment on the property in question, the relevant localities and departments shall, in the overall coordination of the disposition of the illegal fund-raising functional departments, earnestly perform their coordination obligations, and comprehensively use various means to do a good job in clearing and transporting the property involved, realizing the property, and collecting funds. Work such as retreating funds to ensure that actual losses are minimized.

According to relevant regulations, the property involved in the seizure, seizure or freezing shall generally be returned to the fund-raising participants after the end of the lawsuit. If the property involved in the case is insufficiently returned, it shall be returned in proportion to the amount of funds raised by the fund-raising participants. The loss of the returning fundraising participants generally takes precedence over the execution of other civil debts as well as fines and confiscation of property.

According to Article 10 of the “Opinions” on the protection of the rights of fund-raising participants, fund-raising participants are units and individuals that invest in funds raised by illegal fund-raising activities, except for units and individuals that provide assistance for illegal fund-raising activities and obtain economic benefits.

The people's courts, people's procuratorates, and public security organs shall, by promptly publishing the progress of the case and the disposal of the assets involved, and guarantee the legal rights of the fund-raising participants in accordance with the law. The fund-raising participants may elect representatives to submit relevant opinions and suggestions to the people's court; if no representative is elected, the people's court may designate a representative. The people's court may decide to participate in the fund-raising participant's representative or attend a court hearing depending on the circumstances of the case.

Source: Chain Method