The regulatory dilemma behind the 2.7 billion "recommended stock" scam
China News Weekly reporter/Yang Zhijie
Published in the 988th issue of China News Weekly on March 22, 2020
A strange request to withdraw the case caused Li Gang, political commissar of the Criminal Police Brigade of the Longgang Public Security Branch of the Shenzhen Municipal Public Security Bureau to notice that things were abnormal.
In March 2020, a woman went to the Longgang Public Security Bureau to report the case, claiming that Dalian Huaxun Investment Co., Ltd. (hereinafter referred to as "Dalian Huaxun") defrauded the service fee of 28,000 yuan in the name of recommended shares.
The Longgang Public Security Bureau filed the case, but it didn't take long for the informant to come to the Public Security Bureau and forcefully request that the case be withdrawn.
"Generally speaking, it is fine to pay the reporter normally. (Dalian Huaxun) also requires the reporter to delete the evidence." Li Gang has been in contact with telecommunications network fraud cases many times, and he keenly noticed that something is wrong, so he inquired on the public security system. The alarm records all point to Dalian Huaxun.
Searching for keywords on the Internet, many victims have nowhere to complain. They accused the company of illegally recommending shares on social platforms for help.
Public information shows that Dalian ECCOM was listed on the NEEQ in 2015 and is a securities investment consulting agency approved by the China Securities Regulatory Commission with a license to operate securities and futures business.
The Longgang police were worried about hitting a private enterprise by mistake and set up a task force to conduct investigations for 9 months.
On January 6, 2021, Longgang police and Futian police mobilized more than 800 police forces to raided the office building of Dalian Huaxun in Futian District, and imposed criminal coercive measures against 147 suspects on suspicion of fraud and false advertising. Twelve operating and management personnel inside were arrested.
The Longgang police learned during the investigation that up to now, there have been more than 110,000 victims in the Dalian ECCOM fraud case, and the amount involved is as high as 2.7 billion yuan.
In the past 20 years, there have been frequent cases of illegally recommending stocks in China, and this case is the case involving the largest amount of fraud in domestic recommending stocks.
Do not promote to “sensitive” professions such as lawyers and police
Ding Weiwei, 44, is an "old stock investor". In 2017, when she was watching a program on the Financial Life Channel of Shenzhen TV Station, she noticed that a securities expert from Dalian Huaxun was analyzing stock market conditions.
A QR code is attached at the bottom of the screen, and experts provide free consultation in the WeChat group for investors' reference.
Ding Weiwei scanned the QR code to enter the group and found that a stock exchange group of nearly 200 people had an assistant posting screenshots every day. The content was the daily limit stocks recommended by Dalian ECCOM's "recommended stock master", and then a group of friends replied with likes and cheers.
Not only that, after joining the group, three or four customer services took the initiative to add Ding Weiwei's WeChat, taking turns to send her stock daily limit screenshots, but the teacher introduced by each person is different, and the recommended stocks are also different.
Ding Weiwei remained vigilant at first, she never spoke in the group, and rarely responded to private messages.
But she didn't know that many victims, like her, have fallen into well-designed traps since then.
After waiting for a year, Ding Weiwei began to believe in Dalian Huaxun and decided to buy a member.
"The expert is a guest on the Financial Life Channel of Shenzhen TV Station. It is quite authoritative. It is still a listed company on the New Third Board. I think it should not deceive." Ding Weiwei recalled China News Weekly. She remembered that that day was the last one before the National Day. On the trading day, the customer service gave her a discount, and the membership fee for a quarter was 28,000 yuan.
Li Gang introduced that Dalian Huaxun's investment routine is very common in the industry-trying every means to sell securities investment consulting service fees, which is almost all of the company's source of income.
They launched the "ECCOM Stocks" App. The annual fee is divided into VIP version 28,000 yuan, institutional version 76800 yuan, and institutional VIP version 128,000 yuan. They recommend stocks in the app for customers to choose, and claim that the higher the level, the more high-quality stocks recommended. .
In order to achieve their goal, they formulated a set of scams like industrial assembly lines, interlocking and clear division of labor, to lure investors into the bait.
Pulling people into the WeChat group is the first step.
In addition to cooperating with TV stations, Longgang police investigations found that Dalian ECCOM had also posted advertisements on platforms such as Baidu, Douyin, WeChat official account, etc., using "free three golden shares" as a gimmick to lure investors to fill in their personal information, and the salesperson contacted Investors, pull them into the stock exchange group.
In addition, the Longgang police learned from the company’s staff’s confession and judgment document network that the company would also purchase shareholder information. However, when the police arrived at the company on January 7, some of the information had been deleted and the purchase channel was temporarily unavailable.
The company's choice of stockholders also deliberately avoids risks.
An employee explained to the police that the company had a complete set of skills taught to the salesmen during the training, including how to respond to various queries raised by customers, and emphasized that it is not allowed to sell to “sensitive” professions such as lawyers, journalists, and police because of their Legal awareness is relatively strong, and it is more difficult to deal with.
"Generally speaking, companies will choose stockholders who don’t know the stock market deeply. These people have spare money and want to trade in stocks, but they don’t understand the stock market’s high selling and low buying operations. The company uses the information asymmetry to deceive the stockholders to buy high-opening. Shares'." Li Gang said to China News Weekly.
The daily limit stocks recommended to investors are mostly "high-open stocks."
According to Longgang police, from 9:15 to 9:25 every day, it is the call auction time for the domestic stock market. It can be seen that the opening price of the day is compared with the previous day's market, and the stocks that rise or fall can basically be determined.
"Experts" will select a few stocks that are about 5 points higher, and ask the salesperson to recommend them to the group at about 9:28. At this time, the stockholders have no time to buy.
At 9:30, the stock market opens, and these stocks will most likely have their daily limit.
"Experts" are mostly nameless.
Dalian ECCOM publicly stated that the company has 85 professional researchers, 26 national top analysts, and more than 80% of its employees have senior technical titles.
In fact, Longgang police learned that only 4 employees of the company have qualifications for securities investment consulting practice, and many of the employees who directly connect with customers have only junior high school education.
After closing the Internet, Li Gang asked one of the stock recommendation teachers how well he was in stock trading.
The other party said frankly that "the level is not good." During the epidemic last year, he helped the company boss to buy stocks and lost 27 million yuan.
In order to allow shareholders to pay service fees, company employees will violate regulations and promise profits.
According to reports, the salesman promised that the app developed by the company will use big data to select stocks and earn 1 to 3 times the profit in one month.
In order to evade supervision, salesmen often inform shareholders through WeChat voice or phone calls, and the company can deny it afterwards.
Big data stock picking is itself a scam.
An employee responsible for app development explained to the police that the stocks pushed on the app were actually manually screened, and that the app was just a carrier, claiming that the big data algorithm was just to appear more high-end.
"Anyway, I will not buy it myself." The employee said.
Under the remote recommendation of a "famous teacher", Ding Weiwei invested more than 100,000 yuan to buy a "golden stock."
The stocks that she originally held, such as "Zhongke Shuguang", "China Software", and "Ningde Times", are falling continuously, and the teacher persuaded her to stop the loss and quickly get rid of the set.
But after a period of time, the "golden stocks" only rose by a few points and did not reach the limit as promised. Ding Weiwei estimated that the situation was wrong and sold in time, and then the stock plummeted all the way.
The three stocks that were previously unblocked have doubled in less than three months.
Ding Weiwei ran to question the customer service, but the other party said, "Our teacher is very good. You have to trust the teacher and follow the recommendations strictly."
Li Gang learned from Dalian Huaxun employees that this step is called "cooling down" in the company's jargon.
Before buying a member, the salesman posted the daily limit of stocks in the group, and issued member transfer slips and profit screenshots, so that the enthusiasm of the shareholders was high.
Once the stockholders took the bait and handed over the money, the salesman immediately cooled down, and only found some stable stocks from platforms such as Oriental Fortune and threw them to customers.
A scammer told China News Weekly that the company stated that if they are not satisfied within 7 days after purchasing a member, they can apply for a refund, "but during this period they are very careful and recommend tepid stocks, which have increased by a few cents. , Let me sell the next day".
The promised income is difficult to deliver, and investors have spent money to realize that this is a scam.
Some stockholders complained about customer service, and the other party first delayed in every possible way and used a set of "stability maintenance" rhetoric to appease-"Now the market is not good, wait a minute, it will definitely rise later." If someone insists on a refund, the Risk Control Compliance Center It will appear-let the victim sign a settlement agreement with a partial or full refund of the service fee, and ask them to delete the ECCOM App and all chat records to avoid attracting the attention of the regulatory authorities.
Longgang police told China News Weekly that according to preliminary statistics, investors like Ding Weiwei deceived by Dalian Huaxun have exceeded 110,000, mostly middle-aged and young people aged 30-50.
At present, the police are still searching for victims across the country and collecting clues about the case.
"Our company defrauds fool customers' money"
On March 1, Dalian Huaxun Investment issued a stock suspension announcement stating that the Longgang Branch of the Shenzhen Municipal Public Security Bureau filed an investigation into the company for suspected fraud, and the case is still in the stage of investigation and evidence collection.
Li Gang told China News Weekly that whether Dalian Huaxun’s routines can be identified as a fraud is still controversial in the judicial community.
A law professor once proposed that the company’s actions can be regarded as a false marketing method and cannot yet be identified as a criminal crime of fraud.
However, the Longgang police investigation found that Zhou Chuifu had not engaged in regular stock recommendation since he became the chairman of the company, but used this as a cover to commit fraud.
Dalian ECCOM was established in 2000, with Zhou Chuifu as the legal representative, and was listed on the New Third Board in 2015.
This time the Shenzhen police investigated and dealt with the Shenzhen branch located in the Fortune Building in Futian District. The Longgang Police told China News Weekly that this is a branch in name but in fact the main office of the head office. Dalian ECCOM is actually in Dalian. There is no headquarters.
The Shenzhen branch was established in October 2014, and from then on, Zhou Chuifu formally joined Dalian ECCOM.
Prior to this, Zhou Chuifu was the legal representative of Shenzhen Winner Network Co., Ltd. (hereinafter referred to as "Big Winner").
Since its establishment in 2006, Winner has become a high-tech enterprise and a key software enterprise recognized and supported by the Shenzhen Municipal Government. From 2007 to 2009, it received funding from Shenzhen Municipal Government’s high-tech enterprise R&D investment for three consecutive years, and also obtained a consulting license. Legal institutions, there are 135 franchise agencies in Beijing, Nanjing and many other places.
However, in the name of recommending stocks, the company once asked shareholders to purchase software, notified stock purchases by telephone, and verbally promised earnings to trick investors into paying membership service fees.
Zhou Chuifu deliberately created the image of the stock market master on the Internet, and published stock commentary articles many times under the names of "big winner Zhou Chuifu" and "stock doctor Zhou Chuifu".
In 2010, 135 investors reported the big winners in real names, and the amount defrauded by the big winners ranged from a few thousand yuan to 200,000 yuan, with a total of more than 5 million yuan, and a total stock loss of more than 10 million yuan.
Jiemian News reported that several big winner employees were sentenced for fraud, but the boss Zhou Chuifu was always able to escape safely.
After the Big Winner, it was renamed China Stock Finance, which was invested and operated by Dalian Huaxun.
The executives of the two companies are basically operated by a team of people, and their offices are in the same office building.
Investigations by the Longgang police found that in an internal exchange group of Dalian ECCOM, an employee said, "You guys first discuss how to cheat customers' money." Some employees confessed to other friends, "Our company is just cheating fool customers' money. Only those who have no culture and common sense will buy these products and services." Some people sighed in the chat, "I feel that our customers are too pitiful."
According to the statistics of Tianyancha, Dalian ECCOM has 19 branches in China, but 16 of them have been cancelled.
After 2017, many branch companies were accused of various violations of regulations in Dalian, Beijing, Nanjing, Xi'an, Zhengzhou, etc., for providing investment advice to employees who did not obtain the securities investment consulting practice qualification, and the existence of false advertising and misleading information in the consulting. The securities regulatory bureaus in many places have adopted administrative supervision measures.
"We believe that from the big winner until now, the Zhou Chuifu group has not done the normal operation of recommending stocks, that is, pulling people to defraud stockholders' money. From this point of view, we believe that (Dalian Huaxun)'s current practice should be scams. "Li Gang told China News Weekly.
The new routine of "stock god" and "black mouth"
Illegal share recommendation has been repeatedly banned over the years, and the method of recommending shares has evolved from phone calls and text messages to Weibo, WeChat groups and live broadcast rooms.
In August 2020, the China Securities Regulatory Commission issued the "Risk Tips on Preventing the Use of WeChat Groups, QQ Groups and Other "Illegal Referrals" Scams", which clearly mentioned that criminals use Internet tools or platforms such as WeChat, Weibo, and webcast rooms. Carry out "illegal share recommendation" activities.
In fact, it is rare for companies with securities investment advisory qualifications like Dalian Huaxun to conduct stock recommendation fraud, and it is more likely that a team without relevant qualifications illegally recommends stocks.
According to the "Securities Law of the People's Republic of China" and "Interim Measures for the Administration of Securities and Futures Investment Consulting Management", the securities investment consulting business is a franchise, and no institution or individual is allowed to engage in this business without the approval of the China Securities Regulatory Commission.
In addition to the common deception of high service fees, Wang Ying, director of the Securities Transaction Dispute Resolution Legal Affairs Department of Beijing Jingshi Law Firm, introduced to China News Weekly that another common routine is to use the time difference to grab hat transactions (a form of speculation in the stock market). , Refers to institutions or individuals who first buy stocks at low prices and then publicly recommend them. After the stock price rises, they quickly throw out to make profits.) The "stock god" and "black mouth" recommend stocks, and cooperate with the actual controllers and major shareholders of listed companies to help cash out "WeChat group recommendation stocks", and recommend unprotected "original stocks" and "outside stocks".
"Securities Daily" has investigated, some institutions or individuals claimed to have dealings with some hot money and private equity.
In their description, "the hot money reveals news to the recommending stock platform-the hot money ranking-the recommending stock platform to prove its professional ability" has become an industry chain.
In the last link of the industry chain, after investors enter the pit and build positions collectively, the hot money makes a profit and escapes, leaving behind a piece of "leeks."
The most well-known case in recent years was the detention of Liao Yingqiang, a well-known host of the Shanghai Radio and Television CBN Channel, by the police in 2019. This is the first case in which a non-special identity subject has been punished by the China Securities Regulatory Commission to engage in “hat grabbing” in the market.
Liao Yingqiang uses the influence of his well-known securities show host to publicly evaluate and recommend stocks on his Weibo and blog. Before the recommendation, he uses the account group he controls to buy related stocks, and sells them in the afternoon or the next day after the recommendation.
In the end, the China Securities Regulatory Commission decided to confiscate its illegal gains of more than 43.1 million yuan and impose a hefty fine of more than 86.2 million yuan.
In addition, the China Securities Regulatory Commission has pointed out that some so-called "stock experts" will actually engage in other illegal and criminal activities in the name of recommending stocks, such as inducing investors to participate in spot transactions (precious metals, artworks, postal currency cards, etc.) or overseas futures. Transactions for illegal gains.
Li Mingyuan, a Cantonese, is a programmer. He thinks he is a smart man, but he was recommending stocks to buy digital currency and was cheated of all his deposits.
In September last year, he joined a stock exchange group initiated by "Zhuque Finance", and the customer service posted daily screenshots of stocks recommended by "expert" Wei Mingyang.
At the end of December, the routine was upgraded, and the stock recommendation platform was transferred from the WeChat group to the app of the "ZT Exchange". Wei Mingyang broadcasted live every day.
At the beginning of January this year, Wei Mingyang suggested that the stock market has been sluggish recently and you can buy digital currencies.
Multiple currencies will be listed on the platform. Stockholders will deposit money in their accounts and purchase them. After the currencies are listed, they will be resold on the platform for profit.
Li Mingyuan knew that there was a fake, but tried to subscribe for one or two thousand yuan. After reselling, he got twice the income and withdrew the cash smoothly.
"I don't think they will harvest so quickly." Li Mingyuan told China News Weekly. After trying three times, for the fourth time he invested 80,000 yuan with a fluke, but that night, the administrator said that the digital currency would be delayed by 10 The sky is online.
"I reacted at the time, it was broken, and I was deceived." Li Mingyuan said.
He immediately called the police, but there was no evidence to prove that it was a scam.
A few days later, a new currency was launched on the platform. Li Mingyuan calculated that he would spend another 40,000 yuan to buy the currency and resell it to get the proceeds, and he would be able to recover the previous 80,000 yuan in principal.
He successfully sold the currency. The platform showed that the account amount was 120,000 yuan, but after the withdrawal, the recipient became a stranger.
Li Mingyuan immediately contacted the customer service, who claimed that the platform data had been tampered with, so be patient.
But the next day, Li Mingyuan was kicked out of the group chat, and WeChat was blocked by an assistant.
He wrote an accusation article "All savings were cheated, Zhuque Financial Stock Recommendation Group Let You Experience What Is Bankruptcy", which resonated with many victims on Zhihu.
At present, Li Mingyuan has established an exchange group for the deceived of Zhuque Finance. There are currently more than 300 people in the group, covering Xinjiang, Shandong, Guangdong, Shanghai and other provinces, regions and cities, and the amount involved is 167 million yuan.
At present, the victim is reporting to the police in many places, and the case is still under investigation.
Longgang police have uncovered a similar scam.
In October 2019, the Baogang Police Station of the Longgang Public Security Bureau arrested a scam criminal gang that purchased personal mobile phone numbers through online hacked assets, and salesmen added WeChat friends on the grounds of recommending stocks and pulled them into the stock exchange group.
Someone acts as an "expert" to teach and induce clients to invest in futures indexes.
Once a customer has investment intentions, the suspect will lure to the fake platform of "Bit Ocean" to buy the "A50 Index", and then secretly move up and down from the background, looting the customer's investment.
A deceived person was once drawn to a 30-person exchange group, and was later told by the police that, except for himself, the remaining 29 people were all childcare.
How to supervise the "killing pig plate"
Li Gang noticed that for many years, the illegal stock recommendation routines have been exchanged for soups and medicines, but the scale of the victims is increasing.
"In the past, fraud was based on voice alone. It was difficult to have pictures and truth. WeChat group is equivalent to a closed space, which sets the atmosphere, and the other party is more likely to brainwash people." Li Gang told China News Weekly that things with pictures and truth can be Greatly enhance the trust of investors in the content, so the scale of fraud will increase exponentially.
However, Li Gang emphasized that the tool is innocent, it is just being used by others.
The China Securities Regulatory Commission has repeatedly rectified illegally recommended stocks. In the past ten years, related cases of fraudulently recommended stocks have been reported almost every year.
In June 2017, the Wuhan police organized more than 1,000 police forces, arrested 808 persons involved in referral fraud, seized more than 800 computers, more than 2,000 mobile phones, and more than 3,000 bank cards. This is a nationwide crackdown on the use of illegal Internet finance. Among the fraud crimes carried out by the platform, the case with the largest number of people involved was seized.
Why does the illegal recommendation of stocks continue to be banned repeatedly?
Wang Ying believes that the "information market" and "policy market" prevailed in the domestic securities market for a certain period of time, so that stockholders believed in the so-called use of "insider information" and other short-term violations of huge profits. Many investors found investment. Gu institutions often ask to directly recommend profitable stocks, and do not care about complicated investment concepts and skills.
"Therefore, the needs of some investors and the illegal stock recommendation institutions hit it off. As long as the illegal demand of investors is still large, it will be difficult to cure the illegal stock recommendation."
"In terms of supervision, it is possible to prohibit the'big V'from organizing investors to jointly build positions and directly acting as investment advisors for members, but there is no way to prevent investors from their own trust in the'big V'and their lack of understanding of the stock market." He Haifeng, a consultant of Beijing Tiantong Law Firm, mentioned in an interview with a reporter from the Securities Daily that this is the fundamental reason why the current stock recommendation behavior has been repeatedly banned.
Online platforms are also contributing to the flames.
Wang Ying pointed out that the vulnerabilities of the platform include the recommendation of some stock review software advertisements. When investors open certain stock information websites, relevant advertisement links or App download links will pop up.
"These links are often not censored, which is very similar to the original Wei Zexi case of TCM bidding." Wang Ying believes that some online platforms also need to strengthen supervision and censorship of such advertisements, otherwise it is equivalent to sending "poisonous cakes" to them. In the hands of investors.
The new "Securities Law" that was implemented on March 1 last year strengthened penalties for illegally recommending stocks and other manipulations of the securities market.
In terms of legal liability, the fine was adjusted from the original "five for no penalty" to "ten for no penalty", the fine limit was increased from 3 million yuan to 10 million, and the fine limit for persons directly responsible was increased from 600,000 yuan to 5 million yuan.
The China Securities Regulatory Commission has repeatedly reminded investors to be wary of the risks of “bankers” and “big V” joint lures and “killing pigs”, and has deployed dispatched agencies to initiate a three-month special rectification operation. Many places have also cleaned up a number of illegal platforms and platforms. The black mouth of the stock market.
However, it is still very difficult to supervise illegally recommended stocks. A person in charge of the business department of a securities firm mentioned that in recent years, the supervisory authorities have gradually increased their crackdown on illegally recommended stocks and their accuracy has also improved. High mobility, high concealment, divergence in the applicability of laws (involving transnational crimes), etc., and the difficulty of combating is also increasing. It is hoped that relevant departments will be prepared for a protracted war, and at the same time, increase penalties to prevent illegal acts. Not tolerate.
(Intern Zhu Yingsha also contributed to this article. At the request of the interviewee, Ding Weiwei and Li Mingyuan are pseudonyms in the article)
China News Weekly, Issue 10, 2021
Statement: The publication of the "China News Weekly" manuscript is authorized in writing