A 26-year-old accused of fundraising fraud: what the offence involves

On 18 May 2020 the Guangzhou Daily account on Weibo carried a story under the heading "26-year-old woman suspected of fundraising fraud of RMB 14 million", adding that RMB 3 million had gone on beauty treatments to sustain a persona of luxury. The woman, surnamed Lu, borrowed more than RMB 14 million over two years from friends and former classmates. When she was arrested, a little over RMB 40,000 remained in her bank account. The Lin'an police in Hangzhou have recently closed this case of fundraising fraud, which involves more than 40 victims and sums of over RMB 14 million.

Ms Lu finished school at the upper secondary level and ran a property agency in Lin'an. From 2017, while the business was running, she began borrowing from people in her circle at high interest, telling them the money was to advance funds for clients and to satisfy bank capital verification requirements. To keep paying the high interest, she borrowed continuously from friends of friends and from former classmates, using new loans to service old ones. To win lenders' trust she used the borrowed money to package herself, spending heavily on beauty treatments and designer handbags, so that those who lent to her saw a woman of apparently substantial means. She calculated further, occasionally giving lenders gifts to secure their confidence. Her social media feed was carefully stage-managed, presenting a young woman whose career was going smoothly, whose diary was full and who was keen to improve herself. She even hired extras to walk through the supposed steps of a property transaction and filmed them to show to lenders.

"None of the money I borrowed went into the business. It went on interest and principal, and on high living." Confronted with the bank statements the police obtained, Ms Lu explained where the RMB 14 million had gone. More than RMB 3 million went on top-ups at beauty salons alone. (Qianjiang Evening News)

Ms Lu has been arrested with the approval of the procuratorate on suspicion of fundraising fraud.

The typical manifestations of fundraising fraud

(1) absconding with the funds raised;

(2) squandering the funds raised so that they cannot be returned;

(3) using the funds raised for unlawful or criminal activity so that they cannot be returned;

(4) other deceptive conduct combined with a refusal to return the funds, or conduct that makes return impossible.

Under Article 192 of the Criminal Law of the People's Republic of China, the offence of fundraising fraud consists of raising funds illegally by deceptive means with the intent of illegal possession, in breach of financial laws and regulations, thereby disrupting the normal financial order of the state and infringing public and private ownership of property, where the amount involved is relatively large.

Criminal liability for fundraising fraud

Under the Criminal Law, a person who raises funds illegally by deceptive means with the intent of illegal possession, where the amount is relatively large, is liable to fixed-term imprisonment of not more than five years or criminal detention, and to a fine of not less than RMB 20,000 and not more than RMB 200,000; where the amount is huge or there are other serious circumstances, to fixed-term imprisonment of not less than five years and not more than ten years, and to a fine of not less than RMB 50,000 and not more than RMB 500,000; and where the amount is exceptionally huge or there are other especially serious circumstances, to fixed-term imprisonment of not less than ten years or life imprisonment, and to a fine of not less than RMB 50,000 and not more than RMB 500,000 or confiscation of property.

How money lost to fundraising fraud may be recovered

As a general rule, the return of funds obtained by fundraising fraud is handled by a dedicated task force set up by the government. Victims usually register first, after which a repayment ratio is calculated from the total amount defrauded and the amount recovered, and repayments are made in that proportion. A person who neither reports to the police nor registers with the task force will not receive anything.