Inventory of China's high-frequency criminal charges involving virtual currency

Author: Gao Mengyang, senior lawyer of Shanghai Mankiw Law Firm

In recent years, with the emergence of concepts such as metaverse and WEB3.0, the popularity of virtual currency has ushered in wave after wave of peaks. With the promulgation of various strong regulatory policies in the country, the judiciary has also stepped up efforts to crack down on illegal and criminal activities related to virtual currency. The topic of currency-related crimes has become an emerging field that legal practitioners must pay attention to. The starting point for practitioners to carry out ex ante risk compliance. This article will use the form of case retrieval, combined with the characteristics of virtual currency, to organize and analyze currency-related criminal charges, with a view to discussing them together.

Retrieve website: Velters Co., Ltd.

Date retrieved: July 1, 2023

Keywords: “virtual currency”, “criminal cause”

Document Type: Judgment

In this search, a total of 3,714 documents were found. In terms of the classification of the cases, there are 989 crimes of undermining the order of the socialist market economy, 1195 crimes of property infringement, and 1395 crimes of obstructing social management order (concentrating on the crime of opening casinos and helping information network criminal activities, etc.). Generally speaking, currency-related crimes are mostly economic crimes, which are also inseparable from their economic attributes.

Crime of Illegally Absorbing Public Deposits/Crime of Fundraising Fraud

This group of charges is financial crimes, and its behavior is collectively referred to as “illegal fund-raising”, which is a common charge after the P2P financial storm. For virtual currencies, the financial field is also the focus of national prevention. The introduction of policies such as “Announcement on Preventing Financing Risks of Token Issuance” and “Initiatives on Preventing Financial Risks Related to NFTs” also provide guidance for the rectification of financial crimes in the currency circle. basis.

The manifestation of illegal fund-raising in the field of virtual currency is mainly “fund-raising mining”. For example, the (2022) Wan 0422 Xingchu No. 34 Judgment of the Shouxian People’s Court of Anhui Province shows that Bao Moumou used WeChat groups, word of mouth, etc. to promote the “Snail Star Server” mining machine, and promised investors that CAI could be obtained through mining. In this way, the capital can be recovered quickly, and high profits can be generated for a long time. The court finally determined that the fundraising amount was 5.6435 million yuan and the loss amount was 4.2445 million yuan. The two defendants were sentenced one after another.

According to the “Judicial Interpretation of Illegal Fund-raising Cases” and judicial practice, illegal fund-raising behavior needs to meet four basic conditions, namely illegality, openness, temptation and sociality. The identification path in the field of virtual currency is: to publicize to the public (non-specific objects) in various forms online (websites, groups) and offline (promotion meetings, roadshows) without obtaining the permission of relevant departments in accordance with the law , and promises regular income and returns, it may constitute the crime of illegally absorbing off-grid deposits or fund-raising fraud.

Organizing and leading pyramid scheme activities

The crime of pyramid schemes is no stranger. After foreign direct sales models entered China, various forms of pyramid schemes gradually developed due to imperfect market development. In 2005, the State Council promulgated the “Regulations on the Prohibition of Pyramid Selling”, and “pyramid selling” was listed as a prohibited business operation. In 2009, the “Criminal Law Amendment (VII)” was promulgated, and the crime of “organizing and leading pyramid selling activities” was officially punished. According to the “Judicial Interpretation of Organizational Leadership Pyramid Sales Cases”, the essence of Pyramid Sales under the Criminal Law is to “use the number of development personnel as the basis for remuneration or rebates”. Therefore, the identification of MLM crimes in the currency circle cannot escape this category.

For example, the People’s Court of Yunyan District, Guiyang City, Guizhou Province (2020) Qian 0103 Xingchu No. 914 Judgment shows that Huang used the PlusToken wallet to manage money in digital currency (allowing users to store the virtual currency purchased by RMB from the international currency trading platform in the APP). In the name of conducting financial management in China), the levels are formed in a certain order, and the number of development personnel and the amount of investment are used as the basis for calculating rebates, luring participants to continue to develop others to participate, defrauding property, and finally sentenced to three years in prison by the court and fined three years. ten thousand yuan.

Another example is Fuqing City, Fujian Province (2020) Min 0181 Xingchu No. 62 Judgment. Zhi, Li and others referred to other virtual currency models and jointly planned the virtual currency “Eternal Gold Coin” and its operating rules. The dynamic income of “Eternal Gold Coin” is generated by the development of the investor’s downline. Direct referrals to 3 people are level 1, and they can get 7% rebates of the consumption of the first level of offline consumption; On the basis of 2 levels of downline consumption, you can get 3% rebates… There are levels and head fees, and it was finally found by the court as a crime of organizing and leading pyramid selling activities, and was sentenced to a fine.

fraud

The crime that is most likely to be involved in an emerging thing is probably the crime of fraud. The more innovative the field, the more it will be questioned. The “minefield”.

Through the search, the form of defrauding property through false digital currency trading platforms in currency-related fraud crimes is more prominent. For example, the (2022) Xingchu No. 54 Judgment of the People’s Court of Shimen County, Hunan Province shows that Duan and Li set up a “time disk” platform and released advertisements such as “investment on the same day, return on the same day, and withdrawal on the same day” to attract investors. The victim joins in, guides the victim to become a customer, and induces the victim to recharge and invest on the platform, and then the agent acts as a technician to “guide” the customer to buy virtual currency ups and downs or odds and pairs. The agent first uses simple instructions to make the customer profitable to gain its trust and lure the customer Increase the investment, and then directly modify the data through the background risk control authority to manipulate the customer’s profit and loss, and defraud the customer of money.

Another example is the Judgment No. (2021) Hu 0115 Xingchu No. 3630 of the People’s Court of Pudong New Area, Shanghai, which shows that the defendants Qu and Zhao set up a lecturer team as “financial investment experts” to give lectures in the live broadcast room. The lecturer’s prestige was enhanced by means of false profit charts, and then investment instructions were sent to the victim, luring the victim to make so-called “virtual currency investment” on the “BZ”, “AME”, and “ZG” platforms. After the victim recharged the virtual currency on the above-mentioned platform without knowing the truth, the lecturers in the live broadcast room jointly brought the order in reverse, so as to confuse the victim by fabricating the illusion that the victim’s virtual currency hype failed and lost money. In fact, the so-called “investment loss” money of the victim Song and others was divided between the gang and the agents in a pre-agreed ratio. He was finally convicted and punished by the Pudong New Area People’s Court for fraud.

It can be seen from the above two cases that criminal activities involving virtual currency trading platforms are more technical, especially in the first case, where the victim’s investment funds were devoured by modifying data in the background, which is highly concealed , it is difficult to distinguish for a while. In addition, false publicity in the early stage of fraud crimes generally promises high returns or capital-guaranteed returns. Although the falseness is more obvious, with the blessing of high-risk and high-return characteristics in the field of virtual currency, the difficulty of victim identification has increased sharply, and it is extremely easy to be deceived .

Casino crime

Through searching, it was found that this crime involved many “virtual currencies of online games”, so it was excluded. Then, the author found that the crime of opening a casino involving currency mainly revolves around two aspects, one is using virtual currency as a settlement tool (that is, knowing that others use the Internet to carry out gambling activities, but still providing them with exchange services between virtual currency and legal currency); One is gambling based on market price fluctuations of virtual currencies (that is, gambling in the form of buying up and down of a specific virtual currency).

In the former case, the virtual currency used as a settlement tool is essentially the same as the “virtual currency of online games”. It exists only to replace legal currency and be used as gambling funds in gambling activities, so as to avoid being easily attacked by investigative agencies when using legal currency directly.

In the latter case, the price rise and fall of the virtual currency in the market is used as a bet for gambling activities, similar to the comparison of points or size in traditional gambling. For example, in the Judgment (2020) Ji 0622 Xingchu No. 73 of the People’s Court of Jingyu County, Jilin Province, the suspect found that opening a virtual currency trading platform could make money, so he created the “Starcoin Global” platform and set a leveraged transaction multiple of 50 times. Attract gamblers to use USDT (USDT) to bet on the ups and downs of the virtual currency, and take advantage of the 0.2% handling fee of the player’s betting amount. The amount of gambling involved in the case is more than 2.2 million yuan, which constitutes the crime of opening a casino.

Aiding Information Cybercriminal Activities

As a crime that has “emerged suddenly” in recent years, the crime of helping trust has become the third most prosecuted crime (according to the highest prosecutorial data), especially since the implementation of the “broken card” operation, there are people who rent and sell bank cards and mobile phone cards It may be involved in a crime because of this, and the scope of the attack is wider. The characteristics of virtual currency, such as decentralization, anonymization, and transaction convenience, make it easy to become a tool for criminals to launder money. Therefore, a large number of virtual currency traders who receive dirty money and dirty money are likely to be investigated for crimes of accreditation , Prosecute.

For example, in the (2022) Xiang 0281 Xing Chu No. 484 Judgment of the People’s Court of Liling City, Hunan Province, the court held that after the release of the “Notice on Further Preventing and Dealing with the Risk of Hype in Virtual Currency Transactions”, virtual currency-related business activities are illegal financial transactions. Activity. In this case, the defendant knew that there was a lot of black money on the “Ouyi” platform, and that “buying at low prices and selling at high prices” could “make a steady profit without losing money”, so he still specialized in virtual currency transactions on the platform in the form of a studio. In the case of violations or suspected violations of laws and crimes, if effective remedial measures are not taken, but the transaction is continued by changing bank cards or platform accounts, it should be determined that he knows that others use the information network to commit crimes, which constitutes a crime of aiding information network criminal activities.

The People’s Court of Lichuan County, Jiangxi Province also made a similar determination. In the (2022) Jiangxi 1022 Xingchu No. 91 Judgment, the public prosecution agency accused Ruan Moumou, in order to earn the price difference of buying and selling virtual currency (USTD), to purchase virtual currency at the online request, and then found the defendant Chen Mou and others to provide him with Alipay Or WeChat QR code, bank account to transfer funds to buy and sell virtual currency, and promise to give benefits. In the end, the court found that the charges of the public prosecution agency were established, and Ruan Moumou and others constituted the crime of aiding information network criminal activities.

Summary

As a legal practitioner, the author believes that the above crimes should be studied to clarify crimes and non-crimes in currency-related crimes, this crime and that crime, minor crimes and serious crimes, so as to better serve the entire industry; and as a currency circle practitioner Those who commit crimes should have some understanding of the above crimes, and in order to achieve business compliance, they should also be vigilant at all times and not become a party to the case.