On May 19, 2025, the Shanghai Second Intermediate People’s Court made a final ruling on the case of Zhong, who was suspected of illegal business operations and copyright infringement, stating, “The appeal is rejected, and the original judgment is upheld; this ruling is final.”Thus,the first case supported by the Jing’an District Prosecutor’s Office, involving the illegal recommendation of stocks and copyright infringement using a “robot stock trading quantitative trading software,” has come to a close.
In this case, Company S and its actual controller Zhong operated an APP and online platform without approval from the competent authorities, promoting features such as “interval arbitrage” and “DIY stock trading robots” to customers, illegally providing stock trading timing and recommending specific stocks as securities consulting services. At the same time, he purchased a program written by defendant Han, bypassed the technical protection measures of the securities trading software, illegally accessed the securities company’s server, invoked its trading channels, and charged customers a service fee for interface usage.
Illegal Stock Recommendations
Quantitative Trading Software “Hacking” Brokerage Platforms
In July 2011, Zhong and Song (handled in another case) jointly founded Company S, with Zhong serving as CEO and managing all company affairs. Company S primarily engaged in the development and service of internet software products, releasing a stock quantitative SAAS software.
At the beginning of development, Company S lacked the necessary securities qualifications and had not established cooperation with securities companies, so customers could only use the APP for stock data analysis and simulated trading. After obtaining data and analysis results, customers still had to go to the brokerage platform to “buy and sell,” which was inconvenient, resulting in fewer users.
To escape the operational “dilemma,” Company S found hacker Han online and purchased a program he had written. This program could bypass the security protection measures of a certain securities trading system, invoke its trading channels, and help the quantitative trading software connect to relevant brokerage facilities, enabling quantitative trading of securities accounts directly through the APP. Subsequently, Han continued to provide program updates to help cope with system upgrades.
After the illegal interface was created, the gang optimized the value-added service functions of the APP’s DIY stock trading robot. The DIY stock trading robot is a unique trading model created by the company. Customers who purchase the VIP service for 28,800 RMB (all amounts are in RMB) can use the software system to combine the data, models, and parameters provided by the company to determine their own investment “track” and fund allocation plan. Once the plan is activated, if the pre-set conditions are triggered, the software will quickly assist customers in buying and selling the corresponding stocks.
In April 2023, companies providing online trading software services to securities companies reported to the public security authorities that multiple securities companies had feedback about illegal access to the online trading system, indicating illegal stock trading activities. In July 2023, Zhong, Han, and others were arrested by the public security authorities.
Guiding Investigations
Collaboratively Identifying Multiple Criminal Facts
The case was transferred to the prosecutor’s office. When questioned by the prosecutor, Zhong insisted that the DIY stock trading robot he developed was based on plans set by customers, helping them filter and buy the stocks they wanted. In Zhong’s view, the purchasing strategies were all proposed by the customers, and the software merely served as a data analysis tool, thus the company did not require the corresponding qualifications for operation. But is this really the case?
Prosecutor Zhang Dongying believes that the company formed a quantitative trading module for securities investment strategies within the software for customers, and the analysis and filtering done during the stock selection model formation process, while seemingly based on objective data, are actually determined by the company’s unilaterally selected robot algorithms and applicable stock trading “theories.” Different analysis methods will yield different conclusions in stock selection models. This means that while customers appear to set some parameters independently, their role is minimal, and the stock selection model provided by the company plays a decisive role in stock selection. The company’s development of stock selection models should be recognized as a recommendation behavior. Charging a large number of customers using the DIY stock trading robot high membership fees without the corresponding qualifications has already constituted illegal business operations.
On August 18, 2023, the Jing’an District Prosecutor’s Office approved the arrest of Zhong.
During the arrest review stage, prosecutors also discovered that the company’s VIP membership was divided into two tiers: 8,800 RMB and 28,800 RMB, with the software providing services such as “interval arbitrage” to members at the 8,800 RMB tier. The so-called “interval arbitrage” means that the software calculates reference values based on the stock’s fluctuations over several days to recommend stock trading timing to customers or directly provide strategic trading and quantitative trading assistance for customers to complete quantitative investments. Additionally, if customers are dissatisfied with the software’s preset trading algorithms and models, they can contact customer service personnel, who will analyze and recommend based on their experience.Based on this, the prosecutor issued a supplementary investigation outline, guiding the public security authorities to focus further investigations on different types of value-added services to clarify the criminal facts.
Multiple Crimes and Penalties
Clarifying Facts and Punishing Accordingly
On January 18, 2024, the public security authorities transferred the case against defendant Zhong for illegal business operations to the Jing’an District Prosecutor’s Office for review and prosecution.
The public security authorities found that from July 2017 until the case was reported, Company S operated an online platform, promoting stock trading products such as “DIY stock trading robots” and “interval arbitrage,” illegally providing stock trading timing and specific stock recommendations as securities consulting services, profiting from it, with illegal business amounts totaling over 30 million RMB. During the investigation, the public security authorities also verified that starting from July 2019, the company charged customers who directly traded using the quantitative trading software interface (i.e., illegally accessing brokerage channels) a total of over 3 million RMB.
Prosecutor Zhang Dongying believes that Company S incorporated the external program purchased from Han into its own program and deployed it on the company server, allowing Company S’s accounts to bypass the relevant technical protection measures of the brokerage software and illegally access the securities company’s server. This behavior falls under the sixth item of Article 217 of the Criminal Law, which states, “Without the permission of the copyright owner or rights holder, intentionally bypassing or destroying the technical measures taken by the rights holder to protect their works, recordings, or other rights” constitutes copyright infringement. Given that Company S was primarily engaged in criminal activities after its establishment, it should be treated as an individual crime.
Accordingly, on July 2, 2024, the Jing’an District Prosecutor’s Office lawfully prosecuted Zhong for illegal business operations and copyright infringement. On October 31, 2024, the Jing’an District Court made a first-instance judgment, sentencing Zhong to five years and nine months in prison for illegal business operations and imposing a fine of 2 million RMB; for copyright infringement, he was sentenced to three years and nine months in prison and fined 3 million RMB, with a total sentence of seven years and nine months in prison and a fine of 5 million RMB.
Additionally, during the case handling process, it was verified that the hacker Han, who developed the external program, profited a total of 745,000 RMB from this.The financial and intellectual property prosecution department of the Jing’an District Prosecutor’s Office, in collaboration with the cyber prosecution office, worked together on the application of charges, external program identification, and other tasks, accurately identifying the criminal facts of Han providing programs for invading computer information systems.
Prosecutor Zhou Mengmeng believes that Han, by cracking the brokerage trading software and writing the external program, knowingly sold the developed external software to Company S without the relevant administrative licenses and authorizations, helping Company S engage in illegal securities business. His actions constitute the crime of providing programs for invading computer information systems and should be evaluated as the principal offender of this crime, rather than as an accomplice to illegal business operations.
On June 28, 2024, the Jing’an District Prosecutor’s Office lawfully prosecuted Han for providing programs for invading computer information systems. On October 30, 2024, the Jing’an District Court ruled that Han was guilty of providing programs for invading computer information systems, sentencing him to three years in prison, with a three-year probation, and imposing a fine of 300,000 RMB.
Issuing Prosecution Suggestions
Plugging Holes and Establishing Systems
During the handling of the case, prosecutors also discovered that the software company that was invaded failed to resist the intrusion of external programs during the development and maintenance of the securities trading software, leading to the trading communication programs in the software being copied and invoked by others, allowing customers to illegally access the securities company’s server for quantitative trading. Regarding this situation,on September 24, 2024, the Jing’an District Prosecutor’s Office publicly delivered prosecution suggestions to the Shanghai branch of the involved company, urging the company to rectify and improve in three areas: strengthening core technology protection, enhancing security risk inspections, and deepening technological innovation.
“The prosecution suggestions are detailed and highly actionable. As a securities software development company, we will follow the specific requirements of the prosecution suggestions, prioritize security in software development and maintenance, and strengthen updates and iterations of anti-external program protection measures to prevent such external program invasions as much as possible,” said the company representative.
Handling the first case, tackling tough battles, breaking new ground, and solving difficult problems have become the skills honed by the financial and intellectual property prosecutors of the Jing’an District Prosecutor’s Office in practical combat. In the next steps, the Jing’an District Prosecutor’s Office will closely align with the goal of making Jing’an a demonstration area for Shanghai’s international financial center and a carrier area for international technological innovation, earnestly implement the “Ten Measures for Legal Service Guarantee for High-Quality Financial Development” and “Ten Measures for Strengthening Comprehensive Judicial Protection of Intellectual Property Rights to Support the Creation of a Vibrant High-Tech Innovation Hub” plans, continuously promote the comprehensive performance of financial and intellectual property prosecution duties, enhance case handling quality and efficiency, and enrich the supply of legal services to contribute to the high-quality development of the economy and society.
Text by Gu Jiaqi
(All individuals involved in the case are pseudonyms)
