The Supreme Court rendered the 108-Tai-Shang-2403 Decision of January 9, 2020 (hereinafter, the “Decision”), holding that Article 29-1 of the Banking Law is not limited to the solicitation of funds from a massive number of unspecified individuals in a format of a pyramid scheme, and that it would be sufficient to meet the criteria of a multitude of people and of the payment of a reward obviously incomparable to the principal.
According to the facts underlying this Decision, Defendant A was the legal representative of a particular jewelry store, while Defendants B, C and D were all employees of the store. Obviously knowing that a non-banking entity shall neither operate a business that absorbs deposits nor solicit funds under the pretext of borrowing or acceptance of investment, the Defendants accepted payments or absorbed funds from a massive number of unspecified individuals and agreed to pay bonuses or interest obviously incomparable to the principals. Colluding with one another out of the joint criminal intent to violate the Banking Law, the Defendants successively solicited investment in gold trading from, and guaranteed returns for, the victims, resulting in their successive wire transfer or delivery of cash payment. The Defendants jointly absorbed funds illegally in the name of investment and guaranteed returns. Later, beginning with November 2013, the Defendants could not continue to pay bonuses or interest and the checks they had issued could not be cashed. Only then the victims became aware of what had transpired as mentioned above. Therefore, the Defendants were all believed to have allegedly committed an offense set forth in the last part of Article 125, Paragraph 1 of the Banking Law for their violation of Article 29, Paragraph 1 and Article 29-1 of the Banking Law. However, since the original trial court could not prove the crime of the Defendants, the first instance decision, which imposed prison terms, was reversed and rendered a decision to exonerate the Defendants. Therefore, the prosecutor appealed.
According to this Decision, the criteria for violation of Article 29-1 of the Banking Law are soliciting payments or absorbing funds from a multitude of or unspecified individuals by agreeing to pay or paying a bonus, interest, share dividend or any other reward obviously incomparable to the principal. The legal protection interest is to safeguard the rights and interests of the investors in society and to effectively maintain economic and financial order. Therefore, the criteria are not limited to the chain of fund absorption or manners of advertising in the format of a pyramid scheme to massively solicit funds from a massive number of unspecified individuals. The criteria are sufficiently met if the criterion of a multitude of people is met and a bonus, interest, stock dividend or any other reward obviously incomparable to the principal is agreed or paid.
It was further stated in the Decision that according to the testimonies of the victims, A had solicited investment in gold trading or borrowed money under the pretext of gold trading operation. Therefore, A could be found to have solicited investment, absorbed funds or borrowed money from a multitude of people or solicit investment in gold trading by agreeing to a certain percentage amount as a bonus or investment return. He guaranteed not only principals but also returns. The original decision only held that the targets solicited by the Defendants for investment were only limited to a limited number of regular customers or friends, which is different from the business model of an organization generally known as an “underground investment company,” which operates a chain of fund absorption or advertising in the format of a pyramid scheme with hundreds or even thousands of creditors attracted to the scheme. Therefore, it was further inferred that the main operating purpose of the jewelry store operated by A was not to absorb funds and accept deposits in contrast to a typical “underground investment company,” which primarily seeks to absorb funds and maintains its fund-absorbing capability by raising new debts to finance old debts and soliciting new payments to satisfy old payments. Hence, the original trial court held that A’s behavior does not meet the criteria under Article 29-1 of the Banking Law and rendered a decision in favor of the Defendants. Therefore, the appropriateness of the legal principles applied by the original trial court is questionable. Hence, the gist of the prosecutor’s appeal is not groundless.