On The Difference Between Fund-raising Fraud And Private Financing

In recent years, many small and medium-sized entrepreneurs, especially from Wenzhou,Zhejiang Province and Ordos, Inner Mongolia, have launched a Run Away Tide andconstituted fund-raising fraud. Wu Ying case is representative of those cases whereentrepreneurs run away with closed corporations, unpaid debts and troubleshooting disposal.From ever-happened fund-raising cases, it is easy to find that fund-raising cases alwaysinclude a large amount of money, a great number of victims, long crime cycles, lowpossibility of returning funds, and heavy losses, which frequently leads to large-scale massincidents (such as gathering petitions) and serious suicides of victims, and meantime hasdrawn the public’s concern.Frequent fund-raising fraud has greatly challenged and posed serious threats to socialrelationships protected by the criminal law, so China enacts a series of harsh criminal lawsand regulations to crack down on this kind of crime to stabilize social relationships. This trendis becoming more and more obvious from The Supreme People’s Court’s Interpretations ofCertain Issues Concerning Fraud Trial1996to Forum Summary of National CourtsConcerning Financial Crime Trial2001and to The Supreme People’s Court’s Interpretationsof Certain Issues Concerning the Application of Hearing Criminal Cases of illegalFund-raising2010. In the meantime, scholars, even people, concern about pan-criminalizationof the social management. In the context, almost all private financing behaviors suffer severeattack.However, such initiatives cannot adapt to the situation of socio-economic developmentof modern China because Chinese environment both in economy and rule of law has changedgreatly; small and medium enterprises have run up; and private financing behaviors hasrehabilitated and developed. Obviously, distinguishing fund-raising fraud from privatefinancing rationally and ruling respectively conform to the rule of law. Thus, it is veryimportant both in theory and judicial practice to define the nature of financing acts betweenpeople or corporations——is it legal act or illegal fund-raising fraud? Through analyzingcharacteristics of fund-raising fraudulent acts and legal private financing acts, it can be seenthat the essential difference between these two acts is whether “the purpose of illegal possession” in criminal law exists. Therefore, the determination of “the purpose of illegalpossession” is of decisive meaning to distinguish these two kinds of acts.However, the presumed mode concerning the determination of “the purpose of illegalpossession” in judicial practice is not good enough and there are many problems: the currentjudicial presumed mode is contrary to the principle of unification of subjectivity andobjectivity in convicting and sentencing; plots of judicial presumed mode and “the purpose ofillegal possession” don’t have positive logical connection; judicial presumed mode is not upto the criminal standard of proof “beyond a reasonable doubt”, which puts private financing ina dilemma——private financing can transform into illegal fund-raising once somethinghappens, misleads people’s understanding due to the difficulty of determining plots of judicialpresumed mode and directs people’s behaviors wrongly. Finally, through analyzing therelationship between illegal fund-raising and legal private financing and the existing problemsof current judicial presumed mode, the author is intended to give useful recommendations tohandle the problems, that is, filling procedure.