A local market regulator in China has recently ordered Guangzhou-based social commerce portal Peanut Diary to pay RMB 74.5 million (about US$11 million) in fines for its alleged involvement in an online pyramid scheme.
In the penalty decision, Guangzhou market supervisory administration said Peanut Diary had illegally set up multiple marketing levels and rewards members with commissions for recruiting “down-line” users. Pyramid schemes and multi-level marketing systems that resemble pyramid schemes have been made illegal in China and the government regularly cracks down them.
Peanut Dairy said in a statement published last Saturday that it would “respect and accept” the penalty from the market supervisory authority and admitted “non-compliance” in the early stage of the company’s development. The company is relatively young, it was founded in mid-2017.
The penalty is the second and the largest one in social commerce history. In 2017, a Hangzhou market regulator fined social commerce portal Yunji Weidian RMB 9.6 million (US$1.4 million) for organising a pyramid scheme.