China Herbalist Quanjian Group's Founder Gets Nine Years in Ponzi Scheme
Dou Shicong
/SOURCE : yicai
China Herbalist Quanjian Group's Founder Gets Nine Years in Ponzi Scheme

(Yicai Global) Jan. 8 -- Shu Yuhui, the founder of Chinese herbal remedy giant Quanjian Nature Medicine Technology Development, has been sentenced to nine years' imprisonment for organizing and leading an illegal pyramid selling scheme.

The judge in the eastern Chinese megacity of Tianjin where the company is based also rapped Shu with a CNY50 million (USD7.2 million) fine, public court records show.

The court in Tianjin's Wuqing district publicly announced its ruling on Quanjian's Ponzi selling case today, which stated that the actions of Quanjian Group and all of 11 other defendants rose to the level of the crime of leading and organizing pyramid selling activities. It slapped a CNY100 million fine on the medicine firm and sentenced the other 11 accused in the case to terms of imprisonment ranging from three to six years.

Quanjian has been pushing customers to buy products whose selling prices are grossly disproportionate to their costs to obtain company memberships by offering them large rewards since 2007, and then providing them rebates based on the number of its members, so as to gradually build pyramid selling networks and gain huge profits, the court also found, adding Shu Yuhui, as Quanjian's actual controller, was a decisive player in these Ponzi selling activities.

Founded in 2004 by Shu, Quanjian started out mainly with moxibustion or 'fire therapy' -- ignition of alcohol-soaked towels applied to the patient's body to 'dredge the circulatory system' -- before developing several healthcare products like insoles and sanitary napkins. The firm operated over 7,000 moxibustion clinics with annual sales of nearly CNY20 billion (USD2.9 billion) by 2018.

Quanjian Natural Medicine came into the spotlight when it persuaded the parents of a four-year-old girl named Zhou Yang, who suffered from a malignant tumor, to stop her chemotherapy and treat her with its products instead. This ultimately led to the girl's death eight months later.

Quanjian came under public grilling over this incident and Chinese authorities also began probing the supplier of herbal simples at the start of last year,  detaining Shu and another 15 suspects for alleged pyramid selling on Jan. 13 last year. Their open trial took place on Dec. 16 after investigations and legal proceedings that lasted almost an entire year.

Editor: Ben Armour

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Keywords: Shu Yuhui , Quanjian