Hidden Counterfeit Vaping Den in a Village Involves 20 Million Yuan Case

Prosecutors from the Pinggui District visited the scene to understand the situation of the seized goods.

"To avoid detection, I built the factory in different locations to see how the police would investigate!" A counterfeit gang hid their factory producing fake registered trademark e-cigarettes in towns and villages in Guangxi and Hunan, using codes to record production data. After the incident, prosecutors intervened according to the law, guiding the investigation and unraveling the case, ultimately dismantling this counterfeit gang operating in multiple provinces and cities.

In June of this year, the Pinggui District Prosecutor's Office in Hezhou City, Guangxi Zhuang Autonomous Region, filed a public prosecution, and the court made a first-instance judgment: sentencing Mo Moufei and 9 other defendants to prison terms ranging from five to two years for the crime of counterfeiting registered trademarks, with fines ranging from 150,000 to 40,000 yuan. After the first-instance judgment, some defendants appealed. Recently, the Hezhou Intermediate Court made a second-instance ruling, rejecting the appeal and upholding the original judgment.

Incident: The newly built e-cigarette processing factory in the village turned out to be a counterfeit den

A village in Hezhou City is located at the junction of Pinggui District and Babu District, with convenient transportation and a favorable geographical location. Many villagers build factories for rent to attract enterprises. In August 2021, a villager in this village rented out their factory and house to a man from Guilin, Guangxi, named Huang Mouwei to set up an e-cigarette processing factory and employee dormitory. After signing the contract, Huang Mouwei and his accomplices began installing soldering machines, air compressors, and other equipment, and published announcements to recruit a large number of workers. Nearby villagers were quickly attracted, and more than 30 villagers signed up to join the e-cigarette processing factory.

After two days of pre-job training, more than 30 villagers officially started working, assembling cotton rolls, soldering, packaging batteries, injecting oil, capping, and installing mouthpieces, finally sticking on English brand labels they could not understand. In this way, batches of e-cigarettes were produced, packaged, and sent via logistics to Guangzhou, Shenzhen, and other places.

According to workers, the person renting the factory, Huang Mouwei, was only responsible for the soldering line, while the actual owner of the processing factory was Mo Mouchen. Additionally, Li Mouyou, Lin Mingsheng, and his wife Huang Moufang were all managers of the factory.

In May 2022, the market supervision department and public security organs of Hezhou City received reports from several e-cigarette companies in Shenzhen, stating that the e-cigarettes produced by this processing factory were of the same type as their registered trademark e-cigarettes sold abroad, but they had not authorized them.

After several days of investigation, the public security organs, together with the tobacco monopoly bureau and market supervision departments, searched the e-cigarette processing factory, seizing more than 28,000 finished e-cigarettes labeled with the reporting company's brand, as well as a large number of packaging boxes, e-cigarette shells, pipes, and other raw materials, along with electronic oil injection machines, soldering machines, smoke detection instruments, and other production equipment, and arrested five factory managers, including Mo Mouchen, on the same day.

Due to the large number of finished and semi-finished e-cigarettes and complete machinery seized on-site, the public security personnel realized that this case was likely a major counterfeit registered trademark case, so they invited the Pinggui District Prosecutor's Office to intervene and guide the investigation.

The handling prosecutor learned about the case through various methods, including visiting the counterfeit site, reviewing materials, and discussing major cases, and believed that the finished e-cigarettes seized on-site had a high similarity to the e-cigarettes produced by the reporting companies, from packaging boxes to trademarks, with some models being identical. They suggested that the public security organs promptly send the seized finished e-cigarettes for inspection and further interrogate the suspects.

Inspection results showed that more than ten types of e-cigarettes seized on-site were the same products as those produced and sold by four reporting companies with registered trademarks. All five suspects confessed that the factory produced e-cigarettes without business registration and without any authorization. The prosecutor's office believed that the suspects produced the same products without the permission of the registered trademark owners, and the facts of counterfeiting others' registered trademarks were clear, with sufficient evidence, leading to the legal arrest of Mo Mouchen and four others in July 2022.

Deep Investigation: Discovering the Suspect's "Three Burrows"

At this point, the case seemed ready for conclusion. However, a statement in Mo Mouchen's interrogation record caught the prosecutor's attention—"The e-cigarettes produced by the factory were made according to orders from A Fei." Where did the factory's orders come from? Who is "A Fei"? Were there any suspects overlooked in the case, or were there unresolved criminal facts? In response to these questions, the prosecutor's office issued a supplementary investigation outline to the public security organs, suggesting further investigation.

The public security organs, based on the evidence collection opinions, conducted supplementary questioning regarding the identity of "A Fei," and Mo Mouchen further confessed that "A Fei" was his college classmate who told him that producing e-cigarettes was quite profitable and suggested he invest in an e-cigarette processing factory, with raw materials and orders handled by "A Fei," and he only needed to produce according to the orders.

The other four suspects also mentioned a man named "A Fei" during their questioning, who had taught them the production process of e-cigarettes before the factory started operations. Lin Mingsheng and his wife also stated that the raw materials they received were delivered by "A Fei" through logistics, and the finished e-cigarettes were sent to an address provided by "A Fei." Based on the suspects' identification, the public security organs clarified that "A Fei"'s true identity was Mo Moufei from Guilin, Guangxi.

Through investigation, the public security organs tracked Mo Moufei's whereabouts and arrested him along with Lei Moutao, Hu Mou, Yuan Mou, and others while unloading goods at a factory in Pingnan County in August 2022. They also seized another 18,700 finished e-cigarettes identical to those produced by the reporting companies, along with a batch of counterfeit machines and a large amount of e-liquid and other raw materials.

The reporting company confirmed that the e-cigarettes produced by this factory also lacked the necessary authorization. Mo Moufei, Lei Moutao, and others all confessed that the e-cigarettes seized on-site were counterfeiting the reporting company's registered trademarks. Mo Moufei also confessed that both counterfeit dens in Hezhou City and Guigang City were established under his instructions.

The public security organs found that Mo Moufei not only funded and instructed others to establish e-cigarette processing factories in different locations but also partnered with Lei Moutao and others to fund the purchase of raw materials, providing them to the processing factories to produce counterfeit registered trademark e-cigarettes for sale abroad. In October 2022, the Pinggui District Prosecutor's Office made an arrest decision against Mo Moufei and others.

Further investigation by the handling personnel revealed that among the e-cigarettes seized at the counterfeit den in Pingnan County, more than 17,000 were found on a truck outside the den, while only 1,500 bulk finished e-cigarettes were seized inside the factory. According to testimonies from factory workers, the e-cigarettes on the truck were not produced by that factory. The handling personnel believed that the source of the finished e-cigarettes on the truck still needed further verification, and there might be a third or even more counterfeit dens involved in the case. After discussions between the police and prosecutors, it was unanimously agreed that supplementary investigations should be conducted on vehicle tracking, truck driver testimonies, and other aspects.

Following the vehicle tracking, the public security organs traced a factory located in a town in Shaoyang City, Hunan Province, and learned that the factory's owner, Jiang Moufei, and others had been arrested by local public security organs in August 2022, with over 6,000 finished e-cigarettes of various models from the reporting company, semi-finished e-cigarettes, and several brand anti-counterfeiting codes seized. By reviewing the case files from the local public security organs, the handling personnel confirmed that this processing factory was the third counterfeit den in this case, with the manager behind it being Lei Moutao, who had already been arrested by the public security organs.

Cracking the Case: The Mysterious Codes in the Notebook

"This case has a long time span, with the criminal chain distributed across three provinces, and the products sold abroad, making it difficult to determine the amount of the crime," the handling prosecutor from the Pinggui District Prosecutor's Office explained. Due to the presence of both people and goods, the suspects did not dispute the value of the finished e-cigarettes seized on-site. According to the pricing department's assessment, the total number of finished e-cigarettes involved in the case exceeded 50,000, with a value of over 5.55 million yuan.

However, from the establishment of each den to their seizure, about a year had passed. Based on the confessions of various suspects and testimonies from factory workers, each den had been operating normally during this period, with a continuous influx of raw materials and finished e-cigarettes. Therefore, how many finished e-cigarettes were sold during this period, what were their models, and whether all were counterfeit registered trademark e-cigarettes remained unclear, as none of the suspects confessed to this part of the facts, and the public security organs were unable to clarify this when requesting arrests and transferring the case for review and prosecution.

In response, the handling prosecutor focused on re-examining the paper notebooks, original vouchers, transaction forms, and other electronic data of the suspects over the past year, conducting cross-comparisons to verify the crime amounts of each counterfeit den. This evidence, in the form of tables, recorded a large amount of dates, quantities, symbols, and marked numerous codes such as "B5," "B9," "C1," "H," which were suspected to be production data from each den. After careful sorting, the prosecutor clarified that Mo Moufei and his accomplices had produced and sold over 860,000 finished e-cigarettes. Were all these 860,000 e-cigarettes produced without permission of the registered trademarks? What were the specific models of the infringed e-cigarettes?

In response to these questions, the prosecutor's office returned the case for supplementary investigation, suggesting that the public security organs have the seized packaging boxes or trademarks identified by the confessing Lin Mingsheng and others. Through organized identification, Lin Mingsheng and others recognized more than a dozen code symbols, which corresponded to the registered trademark e-cigarette models of the reporting companies.

Based on this, combined with the clarified quantities and prices, the prosecutor's office added the determination of the crime amount of Mo Moufei and others to 20 million yuan. In March of this year, the Pinggui District Prosecutor's Office filed a public prosecution against Mo Moufei and 9 others for the crime of counterfeiting registered trademarks. On June 30, the court accepted the sentencing recommendations from the prosecutor's office and made the above judgment. After some defendants appealed, on September 4, the Hezhou Intermediate Court made a ruling to uphold the original judgment, and the verdict has now taken effect.