Is it illegal to raise funds for relatives and friends to invest in virtual currency?

Recently, a friend in the circle asked: **Helping relatives and friends invest in virtual currency, is it illegal to raise funds? **

Before answering this question, we need to understand the following three questions:

(1) Can individuals invest in virtual currency?

(2) Can I help others invest in virtual currency?

(3) What is illegal fund-raising?

0****1 ** Can individuals invest in virtual currency? **

From the “Notice on Preventing Bitcoin Risks” (hereinafter referred to as “Circular 289”), “Announcement on Preventing Financing Risks of Token Issuance” (hereinafter referred to as “Announcement 9.4”) to “On Further Prevention and Handling of Virtual Currency Trading Hype” Risk Notice" (hereinafter referred to as “9.15 Notice”), the supervisory level has a more cautious attitude towards personal investment in virtual currency, but it has not prohibited it.

Taking the 9.15 notice as an example, for investors, the regulatory authorities only reminded that there are legal risks in investing in virtual currency and the legal consequences of violations: "Any legal person, unincorporated organization or natural person investing in virtual currency and related derivatives violates public order and good customs If the relevant civil legal act is invalid, the resulting losses shall be borne by itself; if it is suspected of disrupting financial order and endangering financial security, relevant departments shall investigate and deal with it in accordance with the law.

That is to say, as long as investors do not violate public order and good customs, disrupt financial order, or endanger financial security, they can invest in virtual currency under the current legal and regulatory framework.

0****2 ** Can you help others invest in virtual currency? **

Entrusting others to invest and accepting entrusted investment activities for others is a very common financial management behavior at present. In practice, entrusted financial management contracts between natural persons investing in stocks, futures and other securities on behalf of others, as long as there is no commitment to guarantee capital and income, generally will be considered effective. Can this judicial practice be applied to virtual currency investment?

Article 84 of the Minutes of the National Court Financial Trial Work Conference (Draft for Comment) issued by the Supreme Court in 2023 clearly stipulates the handling of disputes over entrusted investment in virtual currency: "The parties agree in the contract that the client shall use its own If the account is registered on the virtual currency trading platform in the name and entrusts the trustee to engage in investment activities; or the trustee directly delivers funds to the trustee, and the trustee engages in investment management in his own name or actually borrows the name of others, it can be determined The two parties established an entrusted investment contract. If the contract was signed after the release of the “Announcement on Preventing Financing Risks of Token Issuance” (September 4, 2017), the people’s court should determine that the entrusted contract is invalid because the agency matters are illegal. If the loss suffered, the cause of the entrusted matter may be taken as the main consideration in determining the degree of fault, and the parties shall share it.”

Simply put, before the 9.4 announcement in 2017, entrusting others to invest in virtual currency can be regarded as an entrusted investment contract; after the 9.4 announcement, entrusting others to invest in virtual currency is not legally recognized as such entrustment. Therefore, after the 9.4 announcement, helping others to invest in virtual currency has certain legal risks, but the law does not explicitly prohibit the entrustment and entrustment of virtual currency investment.

Would that constitute illegal fundraising?

0****3 **What is illegal fundraising? **

According to Article 2 of the “Regulations on Prevention and Handling of Illegal Fund-raising”, the following three conditions must be met at the same time to constitute illegal fund-raising:

(1) Absorbing funds without the permission of the financial management department of the State Council or violating the national financial management regulations;

(2) promise to repay principal and interest or give return on investment;

(3) Absorbing funds from unspecified objects.

In the field of criminal crimes, illegal fund-raising is mainly manifested in crimes such as illegally absorbing public deposits and fund-raising fraud. 2. According to the provisions of Article 2 and 7, the following conditions must be met at the same time to constitute illegal absorption of public deposits and fund-raising fraud:

"(1) Absorbing funds without the legal permission of relevant departments or in the form of legal business operations;

(2) Publicize to the public through the Internet, media, promotion meetings, leaflets, mobile phone information, etc.;

(3) Commitment to repay principal and interest or pay returns in currency, physical objects, equity, etc. within a certain period of time;

(4) Absorbing funds from the general public, that is, unspecified social objects.

Absorbing funds for specific objects within relatives, friends or units without publicizing it to the public is not illegal or disguised absorption of public deposits. "

Through the above two regulations, we know that one of the basic elements of illegal fund-raising is “absorbing funds from unspecified objects”, and even in the “Interpretation” it is specifically stipulated that absorbing funds from relatives and friends is not illegal absorption. Therefore, attracting funds for investment among relatives and friends is generally not considered to be illegal fundraising.

0****4 Conclusion

To sum up, it is: ** does not publicize publicity to the public, and only absorbs funds from specific objects (such as relatives, friends, colleagues, etc.), which is generally not enough for illegal fundraising. **In the field of virtual currency, at the current legal level in my country, personal investment in virtual currency is not encouraged but not prohibited. Although natural persons help relatives and friends to invest in virtual currency, although it does not constitute illegal fundraising, it does not belong to entrusted financial management. The risk is mainly reflected in the fact that there are no clear legal rules to judge after a dispute occurs.