Criminal Liabilities For Misuse Of Escrow And Escrow-Fraud Involving Chinese Fintech Actors
Case 1: “裔某集团养老+旅游非法集资案”
Facts:
Between 2009–2021, the group raised about 50 billion RMB from the public, claiming funds would be invested in pension projects, tourism resorts, and real estate.
Investors were told their funds would be escrowed (“托管”) by a third-party custodian, which created a false sense of security.
In reality, funds were diverted to repay earlier investors and for personal use by the principals.
Legal Issues:
Misrepresentation of custody as a form of trust-building.
Misuse of investor funds, creating a Ponzi-like operation.
Outcome:
Key executives were convicted of fraud and illegal public fundraising.
The court highlighted that false escrow claims exacerbate liability because they show deliberate intent to mislead investors.
Significance:
Establishes that using “escrow” as a marketing tool in illegal fundraising increases criminal responsibility.
Case 2: 90 Billion RMB Fundraising Custodian Liability Case
Facts:
In a massive illegal fundraising case, a brokerage firm was designated as custodian for the collected funds.
Investigations found the custodian failed to verify investment transactions or ensure funds were properly allocated.
Legal Issues:
Breach of fiduciary duty by a fund custodian.
Potential complicity in fund misuse due to negligence.
Outcome:
Civil courts required the custodian to compensate investors, citing failure to fulfill escrow obligations.
While not directly criminally liable in this case, authorities indicated that deliberate or collusive breaches could trigger criminal charges.
Significance:
Custodians in fintech cannot act passively; failure to enforce proper oversight exposes them to liability.
Case 3: Third-Party Payment Platform Fraud Case
Facts:
Fraudsters used a third-party payment platform to collect funds under the guise of escrow, claiming investor money was safely held by the platform.
Funds were instead redirected for personal use and cross-platform transfers.
Legal Issues:
Misuse of payment infrastructure as a pseudo-escrow.
Third-party payment’s compliance failures can aid criminal schemes.
Outcome:
Fraudsters were convicted of fraud, while the payment platform was fined for compliance failures.
The case emphasized that platforms may be treated as enablers if they fail to monitor suspicious fund flows.
Significance:
Shows that fintech actors claiming escrow functionality must maintain operational integrity to avoid liability.
Case 4: Yang Weiguo P2P Lending Illegal Deposit Case
Facts:
A P2P lending platform collected public funds claiming to act as an intermediary only.
Investigation revealed the platform controlled the flow of funds and promised returns, essentially operating like a bank without a license.
Legal Issues:
Misrepresentation of platform function to conceal illegal fund control.
Misuse of investor money under an escrow/intermediary façade.
Outcome:
Convicted of illegal absorption of public deposits, demonstrating that “intermediary” claims cannot shield improper fund handling.
Significance:
Distinguishes legitimate fintech intermediation from illegal fund management when escrowed funds are misused.
Case 5: Misuse of Third-Party Payment Account with Credit Features
Facts:
Individuals exploited the credit/overdraft function of third-party payment accounts, misusing them to collect and transfer funds without consent.
The platforms acted as custodians or escrow-like accounts in these transactions.
Legal Issues:
Unauthorized use of funds held by third-party escrow-like accounts.
Potential fraud or credit card fraud depending on account features.
Outcome:
Convicted of fraud/credit card-like fraud.
Courts ruled that misuse of accounts with escrow-like or custodial features constitutes criminal liability.
Significance:
Expands the notion of escrow misuse to include digital accounts with quasi-custodial functions.
Synthesis Across Cases
Misrepresentation of escrow or custodial services enhances criminal liability.
Custodians (real or claimed) cannot be passive; negligence or collusion can trigger civil or criminal consequences.
Third-party payment platforms are increasingly treated as enablers if they fail to monitor transactions and prevent misuse.
Legal distinctions between “intermediary,” “custodian,” and actual fund controller are critical for liability determination.
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