A Fujian-based Group in China Organized a Pyramid Scheme in the Name of Virtual Currency and NFTs; Court of Second Instance Rejects Their Appeal

BlockBeats News, September 2nd, 2023. During the period from May to August 2023, Li and others, under the guise of issuing a certain cryptocurrency, built a hierarchical reward mechanism based on invitation relationships. They formed groups through social platforms, conducted online and offline promotions, and publicly promoted to the general public, enticing participants to qualify for membership through activities such as purchasing cryptocurrency, staking assets, and auctioning NFTs, and received rebates based on developing a downline. By the time of the October 2023 incident, the organization had developed multiple levels and had raised funds equivalent to over 20 million RMB.

The Shishi City Procuratorate of Fujian Province determined through its review that while this organization used new concepts such as cryptocurrency and NFTs for packaging, its operating model still met the criteria of the crime of organizing and leading MLM activities as stipulated in the Criminal Law of the People's Republic of China: Firstly, the project established a "threshold fee" through activities like purchasing cryptocurrency and participating in private placements of virtual assets as a prerequisite for joining and developing others. Secondly, it established clear superior-subordinate relationships and a hierarchical structure, using the number of developed personnel and subordinates' performance as the basis for rewards and rebates. Thirdly, it lacked genuine business activities and sustainable sources of income, relying on the funds from new members to pay out returns to previous entrants and exhibiting obvious characteristics of fraudulent behavior.

Li and others manipulated backend parameters and artificially intervened in the so-called "synthetic probability" and "release mechanism" to create a profit illusion, enticing participants to continuously invest and expand their downlines. This behavior falls under the category of using new technological concepts to conceal traditional MLM crimes, severely infringing on the property rights and interests of the public and disrupting economic and social order.

In June 2024, the Shishi City Procuratorate initiated a public prosecution against the members of this criminal group. In December 2024, the court of first instance sentenced the four defendants to prison terms ranging from six years and six months to three years for the crime of organizing and leading MLM activities, in addition to fines and the confiscation of illegal gains. After the defendants appealed, in July 2025, the second-instance court ruled to reject the appeal and uphold the original verdict. (Net of Justice)