Two Individuals Charged with Fraudulent Fundraising for Introducing Financial Products to Acquaintances

Source: Fazzaco 2020-07-13

Two individuals who introduced hundreds of investors to a shell company promising high and steady returns through get-rich-quick schemes were charged with fraudulent fundraising and sentenced to imprisonment.

Xie, a retiree of a Beijing-based food company, helped raising more than 500 million yuan for Dingxin Xiangrui by introducing financial products to more than 100 acquaintances to seek commission. Similarly, Liu, a business manager of Dingxin Xiangrui, transferred 180 million yuan invested by 82 investors of her former employer to the shell company. Both of them have been awarded a commission of more than 10 million yuan respectively.

According to Article 192 of the Criminal Law of the People’s Republic of China, the legal representative of Dingxin Xiangrui surnamed Zhao was sentenced to 14-year imprisonment and a fine of 300,000 yuan. Liu was sentenced to a lifelong imprisonment and confiscation of all her personal property. They intended to seek illegal gains through scams, which constituted the crime of fraudulent fundraising.

Although Xie was not an employee of Dingxin Xiangrui, his misdeed to solicit public funds constituted the crime of illegal absorbing public deposits, which disrupted the financial order, thus was sentenced to 6-year imprisonment and fined 100,000 yuan.

More than 100 victims fell into the trap because they had trust on their old acquaintance Xie. With him as the intermediary, these investors singed an Investment Entrustment Agreement with Dingxin Xiangrui in which the company promised full deposit refund after 11 months and a 4:6 profit split method. As specified in the agreement, should the profit fail to reach 50% of the deposit, Dingxin Xiangrui would mitigate the fund gap.

Some investors worried about the safety of their funds at the very beginning, but Xie’s efforts to introduce Zhao to them made them feel reassured.

Within two years, Dingxin Xiangrui raised 680 million yuan through falsely advertising high returns from gold spot and futures transaction, although it didn’t have any business resembling real financial products or investment.

Fire cannot be wrapped up in paper. As the investors found out they couldn’t receive the guaranteed returns and deposit as agreed, they reported the scam to the police. Under the pressure, the business manager Liu surrendered herself to the police officers.

The number of victims involved in the hoax was more than 200, but the money misappropriated amounted to 680 million yuan. It is obvious that the investors are mostly magnates. But as friends of Xie or clients of Liu, they never thought to learn about Dingxin Xiangrui from other channels because they had trust on the recommended products.

On top of their misplaced trust, ads of high returns, such as guaranteed deposit and 80% profits, as well as fund compensation in the case of profits lower than 50% of deposit, invoked the greed of the investors.

The lesson we should learn from this case is that suffering losses is inevitable in trading. All sales pitches claiming risk-free profits with guaranteed deposit are definitely baits. Besides, information should be collected before investing, such as the license, archiving, and monthly and annual profits of an asset management company.

Forex Fraud

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Two Individuals Charged with Fraudulent Fundraising for Introducing Financial Products to Acquaintances

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