How Web3 Project Developers Can Avoid Legal Risks - Analysis of Cases Related to Pyramid Schemes

With the rapid development of the Web3 industry, more and more programmers and technical teams are getting involved in the development of blockchain projects. However, some projects that claim to offer "blockchain incentives" or "token rebates" may actually involve pyramid scheme behavior and pose legal risks.

Recent judicial cases show that in several virtual currency pyramid scheme cases, even if technical personnel did not directly participate in promotion or fund operations, they may still be recognized as key participants in the pyramid scheme due to developing rebate logic, designing Token models, or deploying smart contracts with layered reward structures, and treated as accomplices or accessories, with serious cases even regarded as "organizers or leaders."

Case Study Analysis

Taking the PlusToken case as an example, the "intelligent dog arbitrage system" developed by the technical team was used to promote high returns, becoming a key factor in attracting investments. The court ultimately ruled that this function constituted the technical implementation of a pyramid scheme, resulting in multiple technical personnel being sentenced to prison terms of 2 to 11 years.

In the EOS ecosystem platform case, the platform developed members and built multi-level teams under the guise of providing digital currency appreciation services, through methods such as "holding coins for appreciation" and "static income + dynamic commission." Not only the founder but also the employees involved in daily operations and system maintenance were held criminally responsible.

Three Types of Identities That Technical Personnel Are Easily Held Accountable For

1. Project Technical Leader/CTO/Technical Partner: Highest risk, easily recognized as "organizer" or "key personnel".

2. Technical outsourcing companies/freelance developers: Controversial, the key lies in whether they are informed and continuously provide support.

3. Smart Contract Developers/Economic Model Advisors: There is a considerable degree of defense space, but there are still risks if a multi-level marketing characteristic mechanism is designed.

Five High-Risk Business Scenarios

1. Develop "task incentives" and "profit-sharing items" systems in blockchain games/GameFi projects.

2. Design of the NFT/Digital Collectibles Platform "Invitation Rebate" and "Level Unlock" features

3. Token issuance/IDO project deployment with a rebate structure smart contract

4. Virtual mining machine platform participates in the "Hashrate Rebate System" construction.

5. DAO project assistance in developing a ranking system and a fission reward mechanism

Conclusion

The focus of judicial authorities in determining the criminal responsibility of technical personnel does not lie in whether profits are made from promotion, but rather in whether they are aware of the characteristics of the project being a pyramid scheme and provide key technical support. Web3 practitioners should conduct risk identification and boundary delineation at the early stages of a project to avoid unintentionally becoming accomplices.