Original | Odaily Planet Daily ( @OdailyChina )

By Wenser ( @wenser 2010 )

The cryptocurrency industry has always been a dark forest, requiring vigilance not only against on-chain security threats but also against the real-world legal sword. Young and inexperienced individuals, in particular, often have a vague understanding of the criminal risks associated with activities like issuing tokens, over-the-counter (OTC) trading, and manipulating liquidity pools.

To enhance risk prevention awareness, Odaily Planet Daily has sorted out typical domestic currency-related judicial cases in recent years and analyzed key legal risk points (Note: This article is for legal reference only and does not constitute legal advice. Specific terms are subject to official interpretations.)

Charge 1: Reselling foreign exchange constitutes illegal business operation, involving over 200 million yuan

The Supreme People's Court released a typical case showing that the Leshan Intermediate People's Court in Sichuan Province upgraded the trial of a case involving illegal foreign exchange trading using USDT.

Between 2020 and 2021, Wan Mouyuan and others engaged in illegal foreign exchange transactions involving over 234 million yuan through the "RMB-USDT-USD" model. The court found them guilty of illegal business operations and sentenced the principal offender, Wan Mouyuan, to 13 years and 6 months in prison and a fine of 1.14 million yuan. Defendants Huang Mouyuan and Chen Mouwen were convicted of illegal business operations and sentenced to 5 years and 6 months and 2 years and 6 months in prison, respectively, and fined 710,000 yuan and 250,000 yuan. Following the first-instance verdict, the defendants accepted the sentence and the procuratorate did not appeal. The verdict has since taken effect.

There are two other cases involving the crime of illegal business operation, which are listed here:

First, in December 2022, the Dapu County People's Court pronounced a verdict on a case of cash trading of virtual currency . The principal offender Chen was sentenced to eight months in prison and a fine of 20,000 yuan for the crime of illegal business operation; the accomplice Li was sentenced to six months and ten days in prison and a fine of 1,000 yuan; the stolen money of 5,101,770 yuan was confiscated according to law and turned over to the state treasury.

Reportedly, in November 2021, Chen began trading virtual currencies for cash. He purchased USDT from retail cryptocurrency investors he knew and resold it to the acquirer, profiting from the difference. The price of each transaction was set by the acquirer, who compared the price of one U-coin with the current day's prices of other virtual currencies to calculate a profitable price. Because each transaction involved large amounts of cash, Chen, fearing robbery, hired Li as a bodyguard to escort cash transactions with retail investors. The court held that Chen and Li had engaged in a disguised form of foreign exchange trading, using the virtual currency trade as a covert form, in a serious manner that constituted illegal business operations.

Secondly, three young men born after 1995 engaged in a foreign exchange "business" using virtual currency as a medium. In just a few months, they completed over 650 transactions, exchanging nearly 30 million yuan. Following prosecution by the Jianhu County Procuratorate, Lin and the other three were ultimately sentenced to prison terms ranging from five years to one year and six months for illegal business operations , and fined. The prosecutor's review concluded that Lin and the other three used virtual currency as a medium to provide cross-border exchange and payment services to profit from exchange rate differentials. This exploited the unique properties of virtual currency to circumvent national foreign exchange regulations, undermining the effectiveness of foreign exchange management and the stability of legal exchange rates, disrupting normal financial market order. They should be held criminally responsible for illegal business operations.

Odaily Planet Daily Commentary : As we all know, domestic foreign exchange control regulations limit individual foreign exchange transactions to approximately US$50,000 per year. The decentralized and anonymous nature of cryptocurrencies facilitates foreign exchange processing and trading, which in turn presents certain legal risks. The first case, due to the enormous amount of money involved and the long time span of the crimes, stands as a prime example of elevated jurisdiction, demonstrating accurate application of the law, appropriate adjudication, and significant exemplary significance. The second and third cases follow similar circumstances, but perhaps due to their relatively minor circumstances, the corresponding penalties are also relatively light.

Charge 2: Money laundering, bank account turnover of 25,000 yuan, illegal profit of over 5,000 yuan

On July 26, 2024, the People's Court of Liyang City, Jiangsu Province, issued a verdict on a virtual currency money laundering case . An unemployed man, known by the pseudonym Xiao Wu, was sentenced to six months in prison, suspended for one year, and fined RMB 2,000 for participating in virtual currency money laundering activities.

The case file reveals that in November 2023, Xiao Wu contacted a "money laundering company" via Telegram to repay credit card debt incurred from foreign exchange and cryptocurrency investments during college. He purchased U-coins on the trading platform and then transferred and sold them through the "U-MATOU" app, profiting from the difference.

On December 22, 2023, the Zhongguancun Police Station of the Liyang Public Security Bureau received a report from a resident who had been defrauded of 3,830 yuan through a "swiping order" scheme. Preliminary investigation by public security authorities revealed that 2,520 yuan had been deposited into Xiao Wu's bank card. The investigation revealed 13 transactions totaling over 25,000 yuan in Xiao Wu's bank account, resulting in an illegal profit of over 5,000 yuan.

Odaily Planet Daily's sharp commentary : Money laundering is also one of the most common crimes in the cryptocurrency industry. Whether domestically or overseas, regardless of the scale or the background of the people involved, there is a certain risk of money laundering. In particular, individuals use their own bank cards to help illegal companies at home and abroad transfer funds, which can easily constitute the crime of aiding and abetting.

Charge three: Fraud. A post-00s college student issued Tugoucoin and immediately withdrew its liquidity. He was sentenced to 4 years and 6 months in prison and fined 30,000 yuan.

Yang Qichao, a post-00s college student, issued the "Dogcoin" BFF on the BNB Chain. Because he withdrew liquidity, causing others to lose 50,000 USDT, he was found guilty of fraud by the People's Court of Nanyang High-tech Industrial Development Zone in Henan Province at the first instance and sentenced to four years and six months in prison and a fine of 30,000 yuan.

On May 20, 2024, the case opened for a second trial at the Nanyang Intermediate People's Court. Yang Qichao's defense lawyer maintained his innocence, arguing that the virtual currency issued by the defendant, Yang Qichao, possessed a unique and unalterable contract address, precluding any "counterfeit currency." Both the defendant and the individual who reported the case were veterans of the cryptocurrency market and clearly aware of the risks of speculating in virtual currencies. Furthermore, the platform allows for the addition or withdrawal of liquidity at any time, and the defendant's actions did not violate platform rules. The victim's BFF tokens appreciated in value after the incident due to increased liquidity. If the transaction could have been redeemed for more USDT than before, the victim would have suffered no losses. Born in 2000, Yang Qichao was a graduating senior at a Zhejiang university before the incident. In early May 2022, he became aware of a community autonomous organization called District Future DAO, which was conducting preliminary publicity and promotion for the issuance of a decentralized virtual token. He created a token called BFF, which shares the same English name as District Future, and added 300,000 BSC-USD and 630,000 BFF liquidity. The same second Yang Qichao added liquidity, Luo spent 50,000 USDT to exchange for 85,316.72 BFF. Just 24 seconds later, Yang Qichao withdrew the BFF liquidity, resulting in Luo exchanging 81,043 BFF for only 21.6 USDT. While tracing the source, Luo found Yang Qichao through a mutual WeChat friend. He demanded a refund for his losses, but was refused.

On May 3, 2022, Luo filed a police report, alleging he had been defrauded of over 300,000 RMB (converted to 50,000 USDT) from a virtual currency investment. Shortly thereafter, police filed a criminal case on suspicion of fraud and arrested Yang Qichao in Hangzhou, Zhejiang, in November of that year.

Odaily Planet Daily's commentary : Yes, issuing and withdrawing a coin pool is strictly a crime, especially when someone suffers financial losses and the specific issuer can be pinpointed. According to insiders, Yang is a "professional on-chain scammer who runs phishing scams," often opening and withdrawing pools under the guise of legitimate projects at the same time, making him a "professional repeat offender." According to previous news reports, the perpetrator even claimed, "I'm just taking back the points my boss cut me, and I've been scammed plenty of times." Users are reminded to abide by domestic laws and regulations and avoid participating in coin issuance activities.

Charge 4: Organizing and leading pyramid schemes, with the highest amount involved reaching over 210 million yuan

In November 2024, the Yunnan Provincial People's Procuratorate's official account reported that the Shidian County Procuratorate recently filed a public prosecution against Li Moumou and 10 others for organizing and leading a pyramid scheme . Following trial, Li and the other 10 defendants were sentenced to prison terms ranging from six years to two years and fined between RMB 500,000 and RMB 100,000 for organizing and leading a pyramid scheme.

Since May 2021, Li Moumou has successively gathered Huang Mou, Jin Moumou and others to use "blockchain" and "virtual currency" as gimmicks to make illegal profits. They set up 5 funding pools on the online platform on the grounds of purchasing and holding virtual digital currency A and issuing virtual digital currencies B and C. Through on-site meetings, WeChat groups and other offline and online methods, they created a successful persona, took advantage of their special professional background, and used slogans such as "one coin for one luxury house, one coin for one luxury car" and "easily earn hundreds of thousands or millions a day" to widely publicize the reward system and profit prospects, and deceived the general public to obtain membership qualifications by purchasing, destroying, adding to the funding pool, etc., and completing the assigned tasks, and obtaining static dividends and dynamic returns based directly or indirectly on the number of people developed and the amount of investment, forming 5 rebate levels.

An appraisal determined that Li and others had used online platforms to collect over 210 million RMB in pyramid scheme funds. The Shidian County Procuratorate concluded that Li, using virtual currency as a gimmick, colluded with nine other defendants to defraud money and property through online platforms, disrupting economic and social order. The total amount of pyramid scheme funds raised exceeded 210 million RMB, and the circumstances were serious. The actions of Li and the other ten individuals violated Article 224-1 of the Criminal Law of the People's Republic of China, constituting the crime of organizing and leading pyramid scheme activities. Following trial, the court rendered the above-mentioned judgment.

In September of the same year, the Zhongxiang City Procuratorate in Hubei Province prosecuted Chen and three others for organizing and leading a pyramid scheme. Chen and the other three were sentenced to three years in prison, suspended for five years, and fined 350,000 RMB. Police investigations revealed that a pyramid scheme led by Chen, Ding, and Fu decided to issue their own virtual currency for profit. The three agreed on a promotional model, reward system, and profit distribution mechanism, and traveled to a different location to contact Lu, the head of a software design company (handled in a separate case), to develop a virtual currency software app. The app officially launched in February 2022. On February 19 of the same year, Chen and the other three held a press conference for the app, encouraging friends to participate in the virtual currency project. Under the guise of investing in the virtual currency project, they established a pyramid scheme organization called "XX Community." To increase promotional efficiency, Chen and his two associates used online platforms and offline training sessions across the country to promote the virtual currency project. They recruited members through the "XX Community," luring others to invest in virtual currency and become members, subsequently recruiting downline members. The prosecutor handling the case explained that Chen and his two associates rewarded upline members with rebates based on the number of downline members recruited and the amount of downline members' contributions, creating a hierarchical structure. After several months of meticulous promotion, the organization rapidly expanded. To facilitate management, the three individuals divided the organization into five regional battle zones and sixteen pioneer groups, each with key members assigned to lead the charge. Each of the five battle zones held daily morning meetings via online chat software, urging members to complete assigned performance targets.

At the time of the incident, the app had over 10,000 registered member accounts, with the highest level reaching 17. The funds involved in the case amounted to over 57 million yuan. "The virtual currency has no real value, and the project has no real business operations. It relies entirely on the continuous development of downline members to maintain its operation. The profits earned by the upline members are actually the money invested by the downline members. Without a steady stream of downline investment, the project will collapse." The prosecutor in charge explained that Ding, Fu, and Chen directly or indirectly developed over 41 downline members through the app, and their organizational structure constitutes a pyramid scheme within the meaning of criminal law. On January 11, 2023, Chen, Ding, and Fu were arrested by police. Upon their arrest, all three confessed to their crimes and voluntarily returned all illegal gains exceeding 22.59 million yuan. On December 22, 2023, the case was transferred to the Zhongxiang City Procuratorate for prosecution. The prosecutor in charge concluded that the actions of Chen, Ding, and Fu were based on clear facts and sufficient evidence, and that their actions violated Article 224-1 of the Criminal Law of the People's Republic of China, constituting the crime of organizing and leading pyramid schemes. The court subsequently filed a public prosecution, and the local court rendered the above-mentioned judgment.

Odaily Planet Daily's sharp commentary : Cryptocurrency is often a hotbed for pyramid schemes and a common packaging method. This is also a major reason why many people in China are "scared to death" when talking about cryptocurrency. In the two cases mentioned above, one pyramid scheme had as many as five levels; the other pyramid scheme had an exaggerated 17 levels, far exceeding the domestic distribution limit of three levels. The scale of the funds involved was in the tens of millions or even hundreds of millions of RMB, so it was also listed as a representative major case.

Charge 5: Concealing and concealing the proceeds of crime, with the maximum amount involved reaching over 15 million yuan

In March 2021, the People's Procuratorate of Luyi County, Henan Province, handed down a second-instance verdict in a case involving Bitcoin scams. The verdict revealed that seven suspects used their mobile phones to buy and sell virtual currency through virtual currency trading platforms and other Bitcoin software, raking in over 9 million yuan. However, the highest commission received by the seven suspects was only 8,500 yuan, while the lowest was only 500 yuan. The People's Procuratorate of Luyi County, Henan Province, sentenced the seven suspects to prison terms of up to four years and fines of up to 10,000 yuan for concealing the proceeds of crime .

In March 2022, a couple used their virtual currency accounts to launder over 15 million yuan for upstream criminal activities , earning so-called "brick-moving fees." Following prosecution by the Hangzhou Xihu District Procuratorate, the case, which involved laundering funds for a virtual currency "pig-killing" scheme, was adjudicated in early March of this year. Ultimately, Zhang and Chen were sentenced to three years and ten months in prison and a fine of 10,000 yuan for concealing and hiding the proceeds of crime; they were each sentenced to three years in prison, suspended for three years, and fined 8,000 yuan.

In August 2023, the Mawei District Procuratorate of Fuzhou City, Fujian Province, filed a public prosecution against the defendant, Chen, for allegedly concealing and hiding the proceeds of crime . In February 2022, Chen received a call from Lin, who instructed him to download a chat app and, as instructed, send two bank cards in his name to a chat group. Soon, seven transfers were made to the two bank cards, generating a total of 99,609 yuan in bank transactions. Subsequently, Chen continued to follow Lin's instructions, transferring funds from the cards to his Alipay and WeChat accounts, and then from those accounts to a third bank card. Finally, Chen purchased 94,988 yuan worth of virtual U-coins from a seller and sent a screenshot of the transaction to the chat group to complete the transaction, earning a commission of 147.1 yuan. The court sentenced Chen to nine months in prison, suspended for one year, and fined him 5,000 yuan. The prosecutor said: The fraud gang used virtual currency to transfer and launder stolen money. This kind of online money laundering under the guise of purchasing virtual currency and knowing that others used the information network to commit crimes and still providing assistance to them has violated the law.

Odaily Planet Daily Sharp Comment : The parties involved in this crime made a minimum profit of less than 150 yuan, but were eventually sentenced to 9 months in prison, and the fine was much higher than the profit commission. It has to be said that whether engaging in "running points" commission activities by oneself or helping others launder money, it is an extremely risky behavior. I hope everyone will take it as a warning.

Charge 6: Illegal acquisition of computer information, with the highest profit exceeding 2.5 million yuan

In October 2023, a gang consisting of five individuals, including Lin and Chen, paid someone to build a fake benchmark website. They then embedded a purchased Trojan virus in the link and used chat software to trick victims into clicking on the link, allowing them to remotely control their computers and steal virtual currency. The five individuals stole a total of 3,000 USDT coins, valued at 18,000 yuan. In March 2022, the five individuals were apprehended by public security authorities and subsequently prosecuted by the public prosecutor.

The Guangzhou Haizhu Court finally ruled that the five defendants were sentenced to fixed-term imprisonment ranging from 6 months to 2 years and fines ranging from 3,000 yuan to 12,000 yuan for the crime of illegally obtaining computer information .

In June 2024, three employees of the cybersecurity company 360 were sentenced for stealing virtual currency from others . The Xuhui District People's Procuratorate in Shanghai charged that between February 9 and 20, 2023, Hong, along with Yang and Zhang (both handled separately), exploited a Yapi remote code execution vulnerability to gain access to a target virtual currency website. They then used lateral movement and implanted a Trojan to gain control of the intranet server. After locating the server's source code, they downloaded and analyzed the virtual wallet address and private key of the victim, Su, and constructed false instructions to transfer the virtual currency from the victim's virtual wallet. They subsequently exchanged the virtual currency for other virtual currencies and sold them, accumulating over 2.5 million RMB in illegal proceeds.

Odaily Planet Daily Commentary : It's worth noting that many local courts now recognize cryptocurrencies as personal assets. Therefore, stealing cryptocurrencies for profit through methods like Trojans and viruses is considered both a crime of illegally obtaining computer information and, to a certain extent, theft or robbery.

For example, in 2022, the Beijing Shijingshan District People's Court and the Beijing No. 1 Intermediate People's Court heard a civil dispute involving Litecoin investment . They ultimately determined that Litecoin, by nature, is a specific virtual commodity that does not have the same legal status as currency and cannot and should not be circulated and used as currency in the market. However, Litecoin possesses the attributes of virtual property and virtual commodities and should be protected by law. The Beijing Chaoyang District People's Court heard a Bitcoin robbery case and ultimately determined that while virtual currency is not a form of legal tender, this does not affect its property attributes. Virtual currency possesses property attributes under criminal law and can be the subject of property crimes. Ultimately, the defendants, who used violence and coercion to rob others of their Bitcoin, were convicted and punished for robbery.