According to the unified deployment and relevant work requirements of the China Banking and Insurance Regulatory Commission (CBIRC) and the China Banking Association (CBA), China Orient conducted the publicity and education activities of preventing illegal fund-raising in May 2019, to promote financial risk prevention and control, protect the legitimate rights and interests of consumers, contributing its share to the optimization of the economic, ecological environment and the maintenance of financial stability.

I. Definition and Major Characteristics of Illegal Fund-raising

According to the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Laws in the Trial of Criminal Cases of Illegal Fund-raising (Fashi [2010] No. 18), illegal fund-raising refers to the acts of absorbing funds from the public (including units and individuals) in violation of the provisions of the national financial management laws. The act of illegal fund-raising should have four characteristics at the same time, namely, illegality, openness, inducement and sociality:

Illegality: Absorbing funds without the approval of the relevant departments according to law or in the form of borrowing from legitimate operations;

Publicity: Publicize to the public through media, promotion meetings, leaflets, mobile phone messages and other channels;

Inducement: Promise to repay the principal and interest or pay the return in the form of currency, material object, equity, etc. within a certain period;

Sociality: Absorbing funds from the public, that is, from non-specific social objects.

II. Legal Liability of Illegal Fundraisers

According to the Criminal Law of our country, illegal fund-raising, based on the different subjective attitudes, behaviors, harmful consequences and other specific circumstances, constitutes the corresponding charges, the most important of which is the crime of illegally absorbing public deposits in article 176 and the crime of fund-raising fraud in article 192 of the Criminal Law.

According to the Criminal Law, whoever commits the crime of illegally absorbing public deposits shall be sentenced to fixed-term imprisonment of not more than 3 years or criminal detention and shall also, or shall only, be fined not less than 20,000 yuan but not more than 200,000 yuan; if the amount involved is huge or if there are other severe circumstances, the offender shall be sentenced to fixed-term imprisonment of not less than 3 years but not more than 10 years and shall also be fined not less than 50,000 yuan but not more than 500,000 yuan. Whoever commits the crime of fraud by raising funds shall be sentenced to fixed-term imprisonment of not more than 5 years or criminal detention and shall also be fined not less than 20,000 yuan but not more than 200,000 yuan; if the amount involved is huge or if there are other severe circumstances, the offender shall be sentenced to fixed-term imprisonment of not less than 5 years but not more than 10 years and shall also be fined not less than 50,000 yuan but not more than 500,000 yuan; if the amount involved is especially huge or if there are other especially severe circumstances, the offender shall be sentenced to fixed-term imprisonment of not less than 10 years or life imprisonment and a fine of not less than 50,000 yuan but not more than 500,000 yuan or confiscation of property.

III. Conventional Means of Illegal Fund-raising

1. Promise High Returns. Lawbreakers make up the myth of 'pie in the sky' and 'becoming rich overnight,' promising investors high returns. In order to deceive more people into participating in the fund-raising, the illegal fundraisers often fulfill the promised principal and interest in full time at the early stage of fund-raising. However, when the amount of fund-raising reaches a specific scale, they will transfer the funds secretly or abscond with the money causing economic losses to the fund-raising participants.

2. Fabricate False Projects. Most of the lawbreakers, by registering some legal companies or enterprises and under the guise of responding to the national industrial policy and conducting entrepreneurship and innovation, fabricate various false projects, and some even organized free tours and investigations, etc. to gain the trust of the public.

3. Makeup with False Publicity. Lawbreakers often spend a lot of money on publicity, inviting celebrities as spokesmen or for publicity, publishing advertisements in major radio, television, Internet and other media, publishing interview articles in famous newspapers and magazines, hiring people to widely distribute leaflets, making social donations and use different ways to create false momentum.

4. Use Affection to Lure People. In order to complete or increase their performance, some participants in MLM illegal fund-raising will make use of their kinship and geographical relationship, fabricate lies that they have obtained high returns to lure their relatives, friends, classmates or neighbors to join in so that the number of participants will quickly increase. The scale of fund-raising continues to expand.

Ⅳ. 'Four Steps' of Typical Illegal Fund-raising Activities

Step One: Fabricated Prospect. Illegal fundraisers will fabricate one or more 'high-end, large-scale' projects. They often use the guise of 'new technology,' 'new revolution,' 'new policy,' 'blockchain' and 'virtual currency,' to draw a blueprint with widely expected reward, which 'rises' the interests of fund-raising participants, and gives them the illusion of 'a chance of a lifetime' and 'a golden opportunity not to be missed.' Illegal fundraisers usually draw this 'fabricated cake' as large as possible to attract participants' attention as much as possible.

Step Two: Make-up Momentum. Use all resources to make up momentum. Illegal fundraisers usually hold various promotional activities, such as press conferences, product promotions, on-the-spot observation meetings, experience day activities, lectures, etc.; organize group tours, inspections, etc., and give out small gifts such as rice, flour, oil and telephone charges, etc.; display a large number of 'technical certification,' 'award certificates' and 'government approvals' no matter they are true or false; release some video materials of government leaders' investigation or the leaders of the company took photos with government officials and celebrities; deliberately hold the activities in the government conference center and an auditorium with large, deceptive scale and high level.

Step Three: Absorb Money. Try to absorb money from you. By giving rebate and dividend, the illegal fundraisers will offer participants some benefits for the first time, which makes them believe that giving money to the illegal fundraisers not only brings a considerable income but also is safer than putting it in their own pockets. So, the participants will usually give out their own money and even encourage their relatives and friends to join in, which makes the amount of fund-raising larger.

Step Four: Abscond with Money. Illegal fundraisers often abscond with the money after a period of 'absorbing money,' or leave only the empty office due to the original 'Ponzi scheme,' or with the capital chain broken because of poor management. And the participants of fund-raising will suffer substantial economic losses without any payback.