ST Explains: What are pyramid schemes and how are they dealt with in Singapore and China?

If an investment opportunity sounds too good to be true, it probably is, warned the Securities Investors Association (Singapore) in a statement on Sept 4.

PHOTO ILLUSTRATION: PEXELS

Published Sep 04, 2026, 08:50 PM

Updated Sep 04, 2026, 08:50 PM

SINGAPORE - It often starts with an innocuous invitation to attend a sales talk or an overseas trip for what seems like a lucrative business opportunity. Sold as a training programme for how to get rich quick or an exclusive, time-limited deal, the pitch is simple.

All one needs to do is pay an upfront fee and recruit a few others, with promises that the initial investment will be paid back in multiple folds for every additional participant recruited.

There are also promises of financial rewards if these recruits then bring in more new participants, or what is known among these circles as “down-lines”.

This structure of having the earliest participants at the top and later recruits at the bottom is what gives pyramid schemes their name.

And because such schemes are sustained solely by the upfront fees collected from new joiners, rather than income from legitimate sales, they are illegal in countries around the world, including Singapore and China, given the high risk of participants losing all of their money.

On Sept 4, it was revealed that 52 Singaporeans were arrested in China’s Guangxi autonomous region for suspected pyramid scheme activities, in what is likely the largest foreign detention of Singapore citizens on record.

The Straits Times explains how these pyramid schemes operate and how Singapore and China deals with them.

What is difference between a pyramid scheme, MLM and direct selling?

Pyramid selling and multi-level marketing, or MLM, are often used interchangeably . The difference is that the latter involves selling products to consumers, while pyramid schemes are funded solely by recruits’ “joining fees”.

In Singapore, both are banned under the Multi-level Marketing and Pyramid Selling (Prohibition) Act, which was passed in 1973 and later amended in 2000 to broaden its scope.

But when making the 2000 amendment, the Government also recognised that not all MLM techniques are undesirable.

Hence, a legal carve out was made for legitimate businesses such as insurance companies, master franchises and direct selling companies that fulfil certain criteria, like rewarding participants based on the sale of a product or service rather than recruitment.

In China, pyramid selling and MLM schemes, known as “chuan xiao” in Mandarin, are also illegal, while single-level direct selling, which involves a person buying products from a company and selling them on to others, is allowed but tightly regulated.

Under Chinese law, those who lead or organise pyramid schemes that have more than 30 people and more than three levels face a fine and up to five years in jail.

For serious cases – schemes that have 120 or more participants, or involve funds exceeding 2.5 million yuan (S$470,000) – the penalty is a fine and at least five years’ imprisonment.

In Singapore, those who promote or participate in an illegal MLM scheme can be fined up to S$200,000 and jailed for up to five years. Additionally, the courts can impose a separate penalty that does not exceed the amount or value of the benefits received from the illegal scheme.

On its website, the Ministry of Trade and Industry (MTI) said anyone in Singapore who participates in MLM or pyramid selling is considered to have committed an offence as they would have played an “active but destructive role” in attracting others.

“We believe that this is the best way to deter the potential promoters of such schemes,” MTI noted.

How common are pyramid schemes?

In Singapore, the most high-profile case of pyramid selling is the now-defunct Sunshine Empire.

Founded in 2003 by motivational speaker James Phang Wah, the MLM company made wild claims about building fictitious projects such as an underwater city and promised sky-high yields through the company’s investment plan.

In all, about 20,000 Singaporeans were cheated of more than $180 million. In 2010, Phang was jailed for nine years and fined $60,000.

In 2023, then Minister for Home Affairs and Law K. Shanmugam told Parliament that between 2018 and 2022, the Singapore police investigated only one case involving possible pyramid selling and MLM offences.

Over that same period, 10 individuals were convicted of such offences, for investigations that took place before 2018.

Meanwhile, in China, authorities investigated more than 200,000 cases of pyramid schemes and direct selling violations between 2021 and 2025.

Among the most notorious and hardest to eradicate is a scheme called “1040 Sunshine Project”, which is said to have originated in Guangxi as far back as 1998 and has since spread across China and parts of South-east Asia.

There are multiple variations of the scheme that operate under different guises, such as “chain operation”, “capital operation” and the “Beibu Gulf Development Project”.

The general premise is that new participants pay an upfront investment fee of 69,800 yuan, with the promise of earning up to 10.4 million yuan later.

Based on past cases, the scheme operates under a “five-level, three-promotion” structure, with positions ranging from general salespeople to directors and general managers.

Chinese media outlets previously reported that these pyramid networks often operate in secrecy and in small teams to avoid detection and prosecution.

Another common tactic is for these groups to rent residential flats, where participants are brainwashed through group activities and lectures on getting rich.

This is known in China as the “Southern-style” model, which contrasts with “Northern-style” schemes that are characterised by violence and illegal detention.

A growing concern among Chinese lawmakers is that pyramid schemes in the country have evolved to become harder to detect, with many going online and using digital tools like short video and online group buying platforms.

That is one reason why China proposed major changes to existing regulations in May 2026, with the State Administration for Market Regulation pointing to a large number of hidden online pyramid schemes that have fallen through the legal cracks.

How can I protect myself and others from pyramid schemes?

In Singapore, it is the police’s Commercial Affairs Department that investigates pyramid schemes. Those who suspect that a business or investment scheme may constitute pyramid selling can lodge a police report online or at the Police Cantonment Complex in Outram.

Other resources include the Direct Selling Association of Singapore, which represents legitimate direct selling companies operating here, as well as the Monetary Authority of Singapore’s Investor Alert List.

Following the arrest of the 52 Singaporeans in China, Second Minister for Foreign Affairs and Home Affairs Sim Ann urged the public to exercise caution when considering business or investment schemes, whether overseas or local.

The Securities Investors Association (Singapore) (SIAS) issued a similar warning against participating in investment schemes promising exceptionally high returns with low risk through the recruitment of new participants.

In a statement on Sept 4, SIAS said investors should ask some basic questions before transferring any money, including the exact nature of the investment, where the money will be held, whether there are audited financial statements and whether the investment can be withdrawn freely.

“If satisfactory and independently verifiable answers are not available, investors should walk away and not stay because they are tempted by high returns,” the association said.

“If an investment opportunity sounds too good to be true, it probably is, and more often than not, it is likely to be a scam,” it added.

Kok Yufeng is a correspondent at The Straits Times covering China issues.

新加坡证券投资者协会在9月4日的一份声明中警告说，如果一项投资机会听起来好得令人难以置信，那它很可能就是假的。

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发布于2026年9月4日晚上8:50

更新于2026年9月4日晚上8:50

新加坡——骗局往往始于看似无害的邀请，邀请你参加销售讲座或海外旅行，并提供看似有利可图的商业机会。这些项目被包装成快速致富的培训课程或限时独家优惠，推销手法十分简单。

只需预先支付一笔费用，并招募几个其他人，即可获得承诺：每招募一个新参与者，初始投资就会获得数倍的回报。

此外，如果这些新成员能够招募到更多新成员，也就是这些圈子里所谓的“下线”，他们还会承诺给予经济奖励。

这种最早的参与者位于顶端，后来加入的人位于底端的结构，正是金字塔骗局得名的原因。

由于此类计划完全依靠向新加入者收取的预付费用来维持，而不是依靠合法销售收入，因此在包括新加坡和中国在内的世界各国都是非法的，因为参与者有很高的风险损失全部资金。

9月4日，有消息透露，52名新加坡人在中国广西壮族自治区因涉嫌参与传销活动而被捕，这可能是新加坡公民在国外被拘留人数最多的一次。

《海峡时报》解释了这些传销骗局是如何运作的，以及新加坡和中国是如何应对它们的。

传销、多层次营销和直销有什么区别？

传销和多层次营销（MLM）经常被混用。区别在于，后者涉及向消费者销售产品，而传销的资金来源完全依赖于新加入者的“入会费”。

在新加坡，这两项行为均被1973年通过的《多层次营销和金字塔式销售（禁止）法》所禁止，该法于2000年进行了修订，扩大了其适用范围。

但在 2000 年进行修订时，政府也认识到并非所有传销技巧都是不可取的。

因此，法律为保险公司、特许经营公司和直销公司等合法企业做出了例外规定，这些企业必须满足某些标准，例如根据产品或服务的销售情况而不是招募情况来奖励参与者。

在中国，传销和多层次营销（普通话称作“传销”）也是非法的，而单层直销（即个人从公司购买产品并将其转售给其他人）是被允许的，但受到严格监管。

根据中国法律，组织或领导超过30人、超过三层的传销组织者，将面临罚款和最高五年监禁。

对于严重案件——参与人数达到 120 人或以上，或涉及资金超过 250 万元人民币（47 万新元）的骗局——处罚是罚款和至少五年监禁。

在新加坡，推广或参与非法传销活动者最高可被处以20万新元罚款和五年监禁。此外，法院还可以处以不超过其从非法传销活动中获利金额或价值的额外罚款。

新加坡贸易与工业部 (MTI) 在其网站上表示，任何在新加坡参与传销或金字塔式销售的人都被视为犯了罪，因为他们在吸引他人方面发挥了“积极但具有破坏性的作用”。

“我们认为这是阻止此类骗局潜在推手的最佳方法，”贸工部指出。

传销骗局有多普遍？

在新加坡，最引人注目的传销案例是现已倒闭的阳光帝国传销公司。

这家传销公司由励志演说家 James Phang Wah 于 2003 年创立，该公司曾大肆宣传建造水下城市等虚构项目，并承诺通过其投资计划获得极高的收益。

总计约有2万名新加坡人被骗，损失超过1.8亿美元。2010年，潘某被判入狱9年，并被罚款6万美元。

2023年，时任内政部长兼律政部长尚穆根向国会表示，2018年至2022年间，新加坡警方仅调查了一起可能涉及传销和多层次营销的案件。

同期，有 10 人因这类罪行被定罪，这些案件的调查发生在 2018 年之前。

与此同时，在中国，2021年至2025年间，有关部门调查了超过20万起传销和直销违法案件。

其中最臭名昭著、最难根除的计划之一是“1040阳光计划”，据说该计划最早于1998年起源于广西，此后蔓延至中国各地和东南亚部分地区。

该方案有多种变体，以不同的名义运作，例如“连锁运作”、“资本运作”和“北部湾开发项目”。

总体前提是，新参与者需预先支付 69,800 元的投资费，并承诺日后可获得高达 1040 万元的收益。

根据以往案例，该计划采用“五级三晋升”结构，职位从普通销售人员到董事和总经理不等。

中国媒体此前报道称，这些传销网络通常以秘密方式运作，并以小团队形式开展活动，以避免被发现和起诉。

另一个常见的策略是，这些团体租用住宅公寓，通过团体活动和致富讲座对参与者进行洗脑。

在中国，这被称为“南方模式”，与以暴力和非法拘留为特征的“北方模式”形成鲜明对比。

中国立法者日益担忧的是，该国的传销骗局已经演变成更难被发现的骗局，许多骗局转移到线上，利用短视频和在线团购平台等数字工具。

这也是中国在 2026 年 5 月提议对现有法规进行重大修改的原因之一，国家市场监督管理总局指出，大量隐藏的在线传销骗局逃脱了法律的制裁。

我该如何保护自己和他人免受传销骗局的侵害？

在新加坡，负责调查传销骗局的是警方的商业事务局。任何怀疑某项商业或投资计划可能构成传销的人，都可以在线或前往欧南警察总部报案。

其他资源包括代表在新加坡合法经营的直销公司的新加坡直销协会，以及新加坡金融管理局的投资者警示名单。

继 52 名新加坡人在中国被捕后，外交部兼内政部第二部长沈颖敦促公众在考虑商业或投资计划时要谨慎，无论是在海外还是在本地。

新加坡证券投资者协会（SIAS）也发出类似警告，告诫投资者不要参与那些通过招募新参与者来承诺以极低风险获得极高回报的投资计划。

新加坡投资协会 (SIAS) 在 9 月 4 日的一份声明中表示，投资者在转移任何资金之前应该询问一些基本问题，包括投资的确切性质、资金的存放地点、是否有经审计的财务报表以及投资是否可以自由提取。

该协会表示：“如果无法获得令人满意且可独立验证的答案，投资者应该离开，不要因为高回报的诱惑而留下。”

“如果一项投资机会听起来好得令人难以置信，那它很可能就是假的，而且通常情况下，它很可能是一个骗局，”报告补充道。

郭宇峰是《海峡时报》负责报道中国问题的记者。