Repeat Offender Runs Billion-Yuan Pyramid Scheme Under SME Digital Service Cover

Shanghai police have dismantled a sprawling pyramid scheme that posed as a digital transformation service for small and medium-sized enterprises (SMEs), arresting over 40 suspects in a case involving more than 320,000 members and illicit funds exceeding 1 billion yuan (US$148 million), China Central Television reported yesterday.

According to the report, the scheme was orchestrated by a company identified as "Boundless," which lured victims with promises of helping SMEs transition into the digital economy. In reality, the operation was a classic multi-level marketing fraud requiring upfront fees and rewarding members for recruiting new participants.

Promotional materials from Boundless showed the company frequently held recruitment events in its own hotel conference rooms, claiming it aimed to "empower 20 million SMEs worldwide" to undergo digital transformation.

The first step of this so-called transformation was paying a technical service fee to become a corporate member, which granted access to a basic app or mini-program. However, membership was only possible through an invitation from an existing member – a process the company called "linking." Every time a new member was linked, those in the upper tiers received a kickback, which Boundless rebranded as "entrepreneurial support rewards."

According to the company's pricing structure, a minimum payment of 7,000 yuan secured V4 membership and a mini-program, while 70,000 yuan bought V6 membership and a standalone technical service. Higher payments commanded higher membership tiers, with no cap. Entry was strictly by referral.

"For example, if A introduces B, and B introduces C, then both B and A receive a percentage of the reward when B recruits C," police explained. "The more people you recruit and the more you pay, the higher your membership level and the greater your rebate ratio."

Despite the company's stated focus on entrepreneurs, investigators found that most victims were middle-aged and older individuals, many of whom had no prior business experience or knowledge of operating online platforms.

In a coordinated operation, police apprehended more than 40 suspects, including the ringleader, a man surnamed Tang. Authorities confirmed that Boundless had collected over 1 billion yuan in entry fees from members. The case is currently being heard in court.

Tang is no stranger to pyramid scheme convictions. In July 2007, he co-founded Jiangxi Wonderful Life Investment Development Co Ltd, and served as its chairman. In December 2008, the company launched the Pacific Direct Shopping official website, a platform that disguised an elaborate pyramid scheme as an e-commerce business. Participants were required to purchase goods or pay deposits for membership, and were then incentivized to recruit downlines for rebates. That scheme amassed nearly 3.8 billion yuan.

In 2014, Tang was sentenced to 10 years in prison for organizing and leading a pyramid scheme. After his release, he showed no signs of remorse, instead relocating and resuming similar illegal activities.

Remarkably, Tang did not hide his criminal record. He openly referenced his past conviction, claiming it had helped him refine his business model and study laws and policies to ensure his new venture complied with regulations. He used this narrative to persuade victims that his operation aligned with market trends and received state support – all while orchestrating another massive fraud.