Investment solicitation combined with romance scam was judged illegal
Some consumers were induced to invest in corporate bonds, etc. by women who had got acquainted with them through a partner matching website. Two of the consumers filed a suit against the women, companies they worked for, and a person in charge of complaint handling, etc. The following shows details of the case including the appeal court decision.
The court judged that an illegal romance scam approach had been taken in the investment solicitation by the women and that a woman who had been in charge of complaint handling, etc. was also liable as a joint tort-feasor.
The judgment serves as a useful reference because the court squarely recognized illegality of a romance scam approach and liability of the person in charge of complaint handling, etc. as well. (Judgment by the Tokyo High Court on April 20, 2016, published on page 342 of Shohishaho News No.108)
Summary of the case
- Plaintiffs, appellees:
- X1 and X2 (consumers)
- Defendants:
- Company Y1 (company running cram schools), Company Y2 (worker dispatching company), Y3 (woman who served Y1 and then Y2 as a director), Y4 (appellant, person who used to be Y1's director and in charge of complaint handling, etc.), Y5 (woman who served Y2 as a director)
(1) X1 (man) met Y3 (woman) online through a partner matching website. They began to contact each other from May 2013.
In August 2013, Y3 solicited X1 to invest in company Y1. X1 liked Y3 and hoped to become close to Y3 by accepting the request. Then, X1 decided to enter into a contract. On September 15, 2013, X1 signed a contract for investment in company Y1. On the next day, September 16, X1 transferred 4,000,000 yen as investment to Y1's account.
In December 2013, Y3 said to X1, "Company Y2 is floating corporate bonds, The interest rate is higher than that of company Y1." X1 decided to buy Y2's bonds because X1 was emotionally involved with Y3. After receiving the first debenture application form, X1 transferred 2,000,000 yen to Y2's account on December 22, 2013.
On October 18, 2014, Y3 said to X1, "I would appreciate it very much if you could additionally buy the bonds even if only slightly." X1 replied that X1 would further buy 0.5 units (1,000,000 yen) and handed the second debenture application form to Y3 on October 25. On October 29, X1 transferred 1,000,000 yen to Y2's account.
(2) X2 (man) met Y3 online through a partner matching website in August 2013. On September 1, 2013, X2 met Y3 in person for the first time. Since then, X2 occasionally met Y3 and exchanged emails with Y3.
In later October 2013, Y3 solicited X2 to invest in company Y1. X2 liked Y3 and hoped to grow closer to Y3 by accepting the request. X2 decided to invest in Y1 and transferred 1,500,000 yen on October 29 and 8,500,000 yen on October 30 to Y1's account.
When X2 met Y3 on November 6, 2013, Y3 said to X2, "Would you kindly invest 4,000,000 yen in company Y2 and become a shareholder? You can join Y2 family if you become a shareholder of Y2 we are running." I wanted to join Y2 family in which Y3 engaged, so I decided to buy some Y2's stocks. On November 7, X2 transferred 4,000,000 yen to Y2's account specified by Y3.
On December 21, 2013, Y3 met X2 at a coffee shop in a hotel and handed Y2's four certificates of 20 shares.
In May 2014, Y3 said to X2, "I would like you to borrow 2,000,000 yen using credit card loan and to lend the whole money to company Y2." Then, X2 borrowed 2,000,000 yen at a bank. X2 transferred 1,000,000 yen on December 25 and another 1,000,000 yen on December 26 to Y2's account.
(3) Y4 engaged in establishment of company Y2 as a promoter. Y4 served company Y2 as a director from June 2012 to the end of March 2013, and served company Y1 as a director from mid-March 2012 to mid-March 2013.
At company Y2, Y4 was in charge of notification and application for registration to the Labor Bureau. In addition, Y4 received and responded to all the complaints to company Y2 including those from lawyers.
On March 4, 2015, Y4 sent an email to X1 as follows: "I am Y4 serving company Y2 as an adviser. Y2's CEO had an accident and retired from Y2 in January. Company Y2 is in confusion due to lack of funds. Unfortunately, we have no choice but to stop paying bond interest."
On the next day, March 5, 2015, Y4 sent an email to X1 as follows: "As we informed you earlier, company Y2 cannot afford to pay even bond interest. Even if we are ordered to pay money by the court, it's impossible to exact money from us because no money is left. Therefore, the cost of lawsuit would go to waste. I meet each creditor one by one to ask financial support for reconstruction. We have received written consent from nearly 50 creditors already. (The rest is omitted.)"
(4) On June 25, 2013, company Y2 submitted a written notice and a business plan with regard to specified worker dispatching undertakings to the Labor Bureau. On April 7, 2014, company Y2 submitted just a report on the ratio of workers dispatched to former workplaces to the Labor Bureau. After that, company Y2 never submitted business reports for the undertaking (both annual version and updates as of June 1) or a report on settlement of accounts.
(5) Y5 (woman) solicited consumers to invest in company Y1 and company Y2 (hereinafter called "company Y2, etc.") in the same way as Y3.
In these circumstances, X1 and X2 filed a suit against Y2-5 for joint tort. The claim was affirmed in the first instance. Then, Y4 appealed to the court of second instance.
Reason
The appeal court recognized the following facts:
- Y3 got acquainted with X1, etc. through a partner matching website and induced them to invest in company Y2 without explaining risks in investment, while alluding to a closer relationship in the future.
- Y5, Y2's director, also induced consumers to invest in company Y2, etc.
- Y3 and Y5 took the same approach in investment solicitation at around the same period.
Based on these facts, the court construed that Y3 and Y5 had taken an illegal romance scam approach in the investment solicitation because Y3 and Y5 pretended as if they were willing to go out with the men who had got acquainted with through a partner matching website to attract them, and induced them to invest in unrealistic companies. The court recognized that the romance scam approach had been taken on a company-wide basis.
Y4 engaged in establishment of company Y2 as a promoter. Y4 served company Y2 as a director for a certain period of time. Y4 was in charge of notification and application for registration to the Labor Bureau. Y4 received and responded to all the complaints to company Y2. Therefore, the court recognized that Y4 had supported the investment solicitation while knowing that company Y2, etc. took an illegal romance scam approach on a company-wide basis. The court affirmed joint tort liability of Y4, etc. under Article 719 of the Civil Code.
Explanation
The above is a case where consumers were manipulated into paying for investment, corporate bonds and stocks by women who had got acquainted with through a partner matching website. Joint tort liability was affirmed in the first instance. Y4 who used to be a corporate adviser and in charge of complaint handling was absent in the first instance, and appealed to the court of second instance.
The appeal court judged as follows: "Y3 and Y5 induced consumers who had got acquainted with through a partner matching website to invest in unrealistic companies while pretending to be willing to go out with them to attract them. It is possible to recognize that Y3 and Y5 took an illegal romance scam approach in investment solicitation and that the approach was taken in company-wide basis."
In the second instance, Y4 alleged as follows: "I served Y1 and Y2 as an adviser, but I did not engage in collection of corporate bonds. So I am not liable for Y3's tort." In response, the court denied Y4's allegation, stating as follows: "Y4 had supported the investment solicitation while knowing that company Y2, etc. took an illegal romance scam approach on a company-wide basis."
In addition, Y4 alleged as follows: "Company Y2 actually dispatched workers as FX traders to some companies while using funds from corporate bonds. Y2 have never systematically taken such an illegal romance scam approach." However, the court stated as follows: "The evidence shown by Y4 is not enough to prove that company Y2 actually engaged in worker dispatching undertakings. The court cannot recognize that company Y2 actually engaged in worker dispatching undertakings because Y2 never submitted business reports for the undertaking (both annual version and updates as of June 1) or a report on settlement of accounts."
Based on the above, the court construed that the original judgment was reasonable and rejected Y4's appeal. It is noteworthy that the court judged that Y4 who had handled complaints from X1, etc. was also liable as a joint tort-feasor.
Among fraudulent investment solicitation, illegality of a romance scam approach has been less likely to be squarely affirmed (the illegality was denied in the reference precedent 1 and affirmed in the reference precedent 2). The above judgment serves as a useful reference because the romance scam approach was judged illegal.
Reference precedents
- Judgment by the Tokyo High Court on May 26, 2015 (page 69 of Hanrei Jiho No.2280)
- Judgment by the Tokyo District Court on March 1, 2016 (LEX/DB)
