Understand illegal fund-raising and avoid scams and routines.

Illegal fund-raising

Main manifestations

Common manipulations

Typical routine

Main manifestations of illegal fund-raising

Illegal fund-raising activities involve a wide range of contents and various forms of expression. The Regulations on Prevention and Disposal of Illegal Fund-raising summarizes the following forms:

1. Establish Internet enterprises, investment and investment consulting enterprises, various trading places or platforms, farmers’ professional cooperatives, mutual funds organizations and other organizations to absorb funds;

2. Absorb funds in the name of issuing or transferring equity and creditor’s rights, raising funds, selling insurance products, or engaging in various asset management, virtual currency, financial leasing business, etc.;

3. In commercial activities such as selling goods, providing services, and investing in projects, absorbing funds in the form of promising to pay monetary, equity, physical and other returns;

4 in violation of laws, administrative regulations or the relevant provisions of the state, through the mass media, instant messaging tools or other means to publicly spread the information of absorbing funds;

5. Other acts suspected of illegal fund-raising.

Four common techniques

The first is to promise high returns. The criminals fabricated the myth of "falling pie from the sky" and "becoming rich overnight" and promised investors high returns. In order to defraud more people to participate in fund-raising, illegal fund-raisers often pay their promised principal and interest in full and on time at the initial stage of fund-raising. After the fund-raising reaches a certain scale, they secretly transfer funds or abscond with money, causing economic losses to fund-raisers.

The second is to fabricate false projects. Most of the criminals fabricated all kinds of false projects by registering legitimate companies or enterprises, under the guise of responding to national industrial policies and carrying out entrepreneurial innovation, and some even organized free tours and inspections to defraud the public.

The third is to create momentum with false propaganda. Criminals often spend a lot of money on propaganda, hiring celebrity endorsements and celebrity platforms, publishing advertisements in major radio, television, internet and other media, publishing interview articles in famous newspapers, hiring people to widely distribute leaflets, making social donations and other ways to create false momentum.

The fourth is to use family to deceive. Some illegal fund-raising participants, in order to complete or increase their own performance, sometimes adopt pyramid schemes, and do not hesitate to use their family ties and geographical relations to fabricate lies about their high returns, so as to attract relatives, friends, classmates or neighbors to join them, so that the participants spread rapidly and the scale of fund-raising continues to expand.

"Four Steps" of Typical Illegal Fund-raising Activities

Step 1: Draw a cake. Illegal fund-raisers will weave one or more projects that are as high as possible. Under the guise of "new technology", "new revolution", "new policy", "blockchain" and "virtual currency", draw a blueprint with rich expected returns, and "hang up" the appetite of fund-raising participants, giving them the illusion of "don’t miss it" and "now or never". Illegal fund-raisers will generally draw "cakes" to attract the attention of participants as much as possible.

The second step: build momentum. Use all resources to make the momentum bigger. Illegal fund-raisers usually hold various publicity activities, such as press conferences, product promotion meetings, on-site observation meetings, experience days, knowledge lectures, etc. Organize group tours, inspections, etc., and give small gifts such as rice flour oil and telephone bills; A large number of true or false "technical certification", "award certificate" and "government approval" are displayed; Publish some video materials inspected by leaders, and take photos with government officials and stars; Deliberately selecting the event in the government conference center and auditorium is extremely deceptive because of its large scene and high specifications.

Step 3: suck gold. Try to get the money out of your pocket. Illegal fund-raisers give participants a first taste of "sweetness" through rebates and dividends, making them believe that putting money in his place not only has considerable income, but also is safer than putting it in his pocket. Participants not only pour out their own money, but also mobilize relatives and friends to join, and the amount of fund-raising is getting bigger and bigger.

Step 4: Run away. Illegal fund-raisers often run away after "sucking money" for a period of time, or because people who were originally "Ponzi scheme" went to the building, or because of poor management, the capital chain was broken. Fund-raising participants suffered heavy economic losses, or even lost all their money.

Common routines of illegal fund-raising

In order to lure the masses to achieve the purpose of illegal fund-raising, criminals usually take the following measures to defraud the masses of trust.

1. Decorate the facade of the company and create the illusion of strength. Criminals often set up companies to handle business licenses, tax registration and other procedures, which seem legal, but in fact they have no financial qualifications. These companies or offices are high-end and luxurious, or publicize the background of state-owned assets, or invest heavily in packaging publicity through various media or even CCTV, or hold promotion conferences and knowledge lectures in high-end places (such as the Great Hall of the People), inviting celebrities, scholars and officials to build momentum on the platform, showing photos with leaders and various awards, which is more deceptive.

2. Fabricate investment projects to dispel people’s doubts. From the past forms of agriculture, forestry and mining development, private lending, real estate sales, original share issuance, franchise operation, etc., it is gradually upgraded and packaged into various wealth management projects such as investment and wealth management, wealth management, financial mutual assistance and wealth management, overseas listing, private equity, etc., and promises to be guaranteed, repurchased, low risk and high return.

3. Confuse the concept of investment and increase the difficulty of identification. Criminals blow listing in local equity exchange centers into listing, and confuse listing in American OTCBB market with listing on NASDAQ; Some use new terms such as electronic gold, investment funds and online speculation to confuse the masses and pretend to be new investment tools or financial products; Some use monopoly, agency, franchise chain, consumption value-added rebate, e-commerce and other new business methods to deceive the people to invest.

4. Promise high returns and fabricate the myth of "getting rich". Lure at high interest is the only way for all fraud criminals to deceive the masses. At first, the criminals paid the principal and interest of the early investors in full and on time, then they robbed Peter to pay Paul, and used the money of the later people to pay the previous principal and interest. After reaching a certain scale, they secretly transferred the funds and fled with the money.

Source: Beijing Center for Disease Control and Prevention

Original title: "Understanding illegal fund-raising and avoiding scams and routines"

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