How can KOL reduce legal risks when promoting blockchain projects?

Source: Lawyer Liu Honglin

As KOLs (Key Opinion Leaders) in the industry, big Vs are increasingly attracted by blockchain projects because of their influence on social media. People are favored by other parties when promoting projects, and promoting blockchain projects and obtaining direct or indirect income from them has gradually become an important way for big Vs to monetize.

In terms of specific promotion methods, traditional publicity models, such as simple and crude links, advertising, or posting experience reviews and experience sharing on social media, no longer meet the needs of project parties. The recently popular private domain marketing has gradually become an important channel for the promotion of blockchain projects. Big Vs have deeply "planted grass" in their personal private communities and attracted extremely high traffic to the project at a very low cost.

However, although blockchain technology itself has been recognized and supported in our country, as early as May 2016, the State Council issued the "13th Five-Year Plan" National Science and Technology Innovation Plan, which clearly proposed the use of blockchain technology. Focus on supporting the direction, but the legal risks involved in blockchain projects and corresponding virtual currency transactions are often ignored intentionally or unintentionally by big Vs in their marketing.

01 Civil legal risk prevention

The first is civil risk . Wetake proxy investment, a relatively common project in the currency circle, as an example. When promoting blockchain projects, big V often engages in the behavior of "investing on behalf of others". That is, many participants send funds to the big V to entrust them with virtual currency transactions based on their trust in the big V. When a big V "invests on behalf of others", it may be a simple act of entrusting the purchase and sale of virtual currencies, or it may be an entrusted investment act that stipulates investment risk bearing and income distribution.

Are the parties involved in these "agency investment" activities protected by law?

The answer is: difficult.

The "Announcement on Preventing Token Issuance Financing Risks" issued by seven departments including the People's Bank of China clearly prohibits token financing platforms, financial institutions and non-financial payment institutions from providing exchange, pricing, etc. for "virtual currencies" Serve. At present, courts often cite this announcement and determine the relationship between the big V and the participants based on Article 153 of the Civil Code: "Civil legal acts that violate the mandatory provisions of laws and administrative regulations are invalid." Entrusted trading, investment and other activities between the parties are invalid.

Once it is deemed invalid, Dav may have to face a series of disputes such as return, compensation or compensation. (Article 157 of the Civil Code: “After a civil legal act is invalid, revoked or determined to be ineffective, the property obtained by the actor as a result of the act shall be returned; if it cannot be returned or is not necessary, compensation shall be made at a discount . The party at fault should compensate the other party for the losses suffered; if all parties are at fault, they should each bear corresponding responsibilities.")

If we talk about civil risks, they are acceptable to them. Then the criminal risk may be unbearable for most people.

02 Criminal Legal Risk Prevention

(PlusToken platform’s huge advertisement abroad)< /span>

The "PlusToken" platform, once known as "the largest fund in the currency circle", has developed millions of dollars in just one year after the platform App was officially launched on May 1, 2018. People from more than 100 regions around the world hold a series of currencies such as 320,000 Bitcoins and 9.2 million Ethereums. At that time, the platform's valuation exceeded 50 billion, carrying the dream of countless people to get rich overnight.

(On June 27, 2019, the platform page prompted "Sorry, we ran away")

On June 27, 2019, Plustoken announced that it would stop withdrawing cash and announced a high-profile run on its platform. The truth is on the road, millions of people on the platform announced that their dreams are broken! As the main builder of the platform, Ding has promised others high returns in order to promote the platform, and has as many as 336 members under his account. There is no doubt that Ding was an undeniable "big V" at that time! During the subsequent court hearing, although Ding argued that "he was just an ordinary member," he was still sentenced to organize and lead pyramid selling activities. He was sentenced to eight years and eight months in prison and fined RMB 4 million. His marketing and promotion behavior during the operation of the platform obviously "contributed a lot" to his final punishment.

So how come my "relying on strength" to attract traffic involves organizing and leading MLM crimes?

Article 224 of my country's "Criminal Law" defines the crime of organizing and leading pyramid schemes as follows: Organizing and leading, in the name of selling goods, providing services and other business activities, require participants to pay To obtain membership qualifications by paying fees or purchasing goods and services, and forming hierarchies in a certain order, directly or indirectly using the number of developers as the basis for remuneration or rebates, luring and coercing participants to continue developing others to participate, defrauding property, and disrupting the economic and social order Whoever engages in pyramid selling activities shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention and shall also be fined; if the circumstances are serious, he shall be sentenced to fixed-term imprisonment of not less than five years and shall also be fined.

In short, it is to charge an "entry fee" + pay per head + lure and coerce participants to continue to recruit others to participate in order to defraud property. If the big V and the project party agree to receive remuneration in the aforementioned way, then it is very likely that pyramid schemes have been involved.

I believe people in this circle of friends are very familiar with it. If a big V publishes a link, QR code or forwards relevant tweets in their circle of friends to attract traffic, participants can become an "apprentice" exclusive to the big V by clicking on the link, scanning the code or entering a specific "invitation code". Nominal offline, and directly or indirectly obtain income from layers of offline. This form of remuneration for project promotion is very likely to be regarded as a pyramid scheme by the public security organs.

Lawyer Mankiw has previously compiled a comparison of MLM in the sense of criminal law and administrative law. It is also a pyramid scheme, but there are obvious differences between criminal law and administrative law. Generally speaking, although the penalty for pyramid schemes in the administrative law sense is lighter, the scope of the attack is wider. For example, there are no requirements on the number of people and levels of pyramid schemes.

In addition, the crime of opening a casino is also the hardest hit area for blockchain projects.

The crime of opening a casino refers to a crime that objectively involves gathering people to gamble, opening a casino, and making gambling a business. According to the second paragraph of Article 303 of the Criminal Law, “Whoever opens a casino shall be sentenced to fixed-term imprisonment of not more than five years, criminal detention or surveillance, and shall also be fined; if the circumstances are serious, he shall be sentenced to fixed-term imprisonment of not less than five years but not more than 10 years, and shall also be fined. Penalties will be imposed."

In the case of gambling involving blockchain projects, it is possible that the blockchain project itself is a gambling platform of various forms, and it is just a form of betting using virtual currency as a bargaining chip, or It may be that the platform knowingly still provides virtual currency and legal currency acceptance services for other gambling platforms, which is likely to involve the crime of opening a casino. Among them, the behavior of a big V acting as a platform agent, investing on behalf of others, inviting others to participate in gambling, or recruiting lower-level agents may constitute the crime of opening a casino.

So how to promote blockchain projects within the framework of legal compliance?

03 Mankiw’s lawyer suggested

First It is to do a good job of back-checking. The “negative list” should be the “gatekeeper” for big Vs. Judging from the current judicial precedents in my country, most of the legal risks faced by big V when promoting projects come from the blockchain project itself. If the project itself is illegal, involving pyramid schemes, fraud, or illegally absorbing public deposits, no matter whether the big V knows about it or not, it is very likely that he will bear legal liability in the end. It is just a question of what kind of responsibility, what crime, and severity of punishment. Therefore, don’t be blinded by money. When accepting an order, you will never go wrong by doing more background checks on the project and the operator.

Secondly, the remuneration method is the top priority to avoid legal risks, especially the crime of organizing and leading pyramid schemes. As mentioned above, the core of MLM is to obtain profits from "entry fee", "capitation fee" and development of downlines. Therefore, when promoting a blockchain project, it is best to directly agree on a fixed remuneration with the project party. , and use legal currency as the payment method. Even if the commission needs to be based on traffic diversion data, multiple levels and layered charges should be avoided.

Finally, among the criminal cases involving big Vs that Lawyer Mankiw has contacted, a large number of cases were caused by users complaining to the Consumers Association and reporting to the public security organs after the platform was unable to meet the needs of users. Caused by court prosecution. Therefore, once there are complaints on the platform, as the original guide, big V should cooperate with the platform to actively handle the complaints to avoid intensification of conflicts and unnecessary trouble.

In the physics world, there is a joke: "When you are in doubt, ask a lawyer". In the business world, "When you are in doubt, ask a lawyer early" is not wrong. The intervention of professional lawyers beforehand is often more effective than "fire-fighting" afterward. Early judgment, early prevention, and isolating legal risks beforehand often get twice the result with half the effort. As the saying goes, "A gentleman does not stand behind a dangerous wall."