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In practice, many parties involved prefer not to register with their real-name identity information when using exchange apps. Some people do not fully understand domestic regulatory policies, believing that personal investment in virtual currencies is illegal, and that using real-name information to purchase virtual currencies on exchanges may lead to legal liability. Others aim to circumvent platform activity restrictions by using other people's identity information to register multiple accounts for participating in activities to maximize benefits. In short, such actions of non-real-name KYC registration violate the platform's risk control and even anti-money laundering regulations.
In the previous article, we shared the legal risks that trading platforms face due to users not undergoing real-name KYC. For details, refer to (Why are non-real-name KYC users easily subject to risk control and freezing by exchanges?). In this article, I will analyze the legal risks faced by retail investors in the cryptocurrency sector if they do not register for exchange accounts through real-name KYC, using two real cases.
1. Providing non-real-name KYC exchange accounts to others was judged as aiding and abetting crime.
Case Number: (2024) Hu 7101 Criminal First Instance 277
Case Summary:
Between November 2023 and January 2024, the defendant Li, knowing that the accounts he provided could be used for illegal activities, provided exchange accounts registered with other people's identity information to the "upstream" party for illegal profit, claiming a profit of about 15,000 RMB. The OKEx account registered in Dong's name that he provided had a one-way cash flow of over 680,000 USDT from January 26 to 29, equivalent to over 4.9 million RMB, with confirmed fraudulent amounts totaling over 330,000 RMB.
Ultimately, the court found that the defendant Li knowingly assisted others in committing crimes using information networks, and that the circumstances were serious, constituting the crime of aiding information network criminal activities. He was sentenced to one year in prison, with one year of probation, and fined 4,000 RMB.
Lawyer's Analysis:
In this case, the defendant Li sold an OKEx exchange account registered with someone else's identity information to a so-called "upstream" party. This situation is common in the cryptocurrency sector, especially when individual investors seek to participate in IEO activities on platforms and register multiple accounts for new investments, often turning to studios like Li's to purchase pre-registered accounts. The key difference in this case is that Li knowingly sold the account knowing it could be used for illegal activities, and his provided exchange account was used by criminals for money laundering and other illegal activities. Within three days, the USDT one-way cash flow of the account he provided amounted to more than 4.9 million RMB.
In fact, this situation involves criminal gangs using non-real-name accounts on OKEx to receive USDT obtained through telecom fraud. The studio, seeking profit, did not verify the purpose of the purchases, and the selling price of the accounts was clearly higher than the market price. The account showed abnormal short-term cash flow, ultimately being determined as knowingly involved in aiding and abetting crime.
This case serves as a good risk warning regarding the behavior of cryptocurrency studios selling exchange accounts. Among exchange users, there are already some groups using virtual currencies for criminal activities. Exchanges cooperate with regulatory enforcement agencies through various risk control and anti-money laundering rules to combat these activities. However, the behavior of studios selling non-real-name KYC finished accounts indirectly assists criminals in evading risk control and regulatory enforcement. Once the "upstream" party purchasing the account becomes involved in crime, the studio will inevitably be implicated. Therefore, cryptocurrency studios must fulfill their due diligence obligations, and terminate any abnormal transactions in a timely manner, and must not test the law.
2. Using another person's exchange account to participate in financial activities leads to theft of coins.
Case Summary:
In a theft case heard in June 2022 by the Haikou Intermediate People's Court, the victim Wang purchased high-yield financial products from the exchange Huobi and wanted to invest more. However, each account had a purchase limit, so Wang reached a verbal agreement with the defendant Xiang to register an exchange account in Xiang's name. The usage rights of these accounts belonged to the victim, who also bore the investment risk. If there was a profit, 4% of the profits would be given to the defendant Xiang as a return.
Later, the defendant Xiang stole the mobile card registered in Xiang's name that Wang used and stole virtual currency by changing the exchange account password. He ultimately illegally profited over 13 million RMB, squandered the ill-gotten gains on gambling and luxury cars, and transferred over 2.4 million RMB to relatives and friends. His bank account was frozen with over 2.61 million RMB. Upon arrest, the criminal suspect Xiang not only did not cooperate with the investigation but also claimed that Wang lent him money to invest in virtual currency, believing he had the right to dispose of the virtual currency in the seven accounts, arguing that he did not commit a crime and refusing to plead guilty. Ultimately, the defendant Wang was convicted of theft and sentenced to 15 years in prison and fined 600,000 RMB.
Lawyer's Analysis:
Exchange financial products can be profitable, and using multiple accounts to subscribe can maximize returns. However, the risk is that if someone registers using another person's identity information, that person can easily regain control of the account by requesting customer service. This poses a risk of virtual assets purchased by investors using another person's account being transferred or stolen.
In this case, Wang used the exchange account registered in Xiang's name to purchase financial products, giving 4% of the profits to Xiang as compensation. However, compared to the large virtual assets in the account, this compensation could not guarantee that the defendant Xiang would not have any thoughts of transferring or stealing the funds. Ultimately, the defendant stole more than 13 million RMB worth of virtual assets from the victim Wang and squandered it through gambling and purchasing luxury cars, causing significant financial loss to Wang. Xiang was sentenced to 15 years in prison for theft.
Summary and Reflection
The two cases shared today mainly emphasize the criminal risks and potential asset losses involved in registering and using exchange accounts with other people's identity information. For cryptocurrency investors who need to operate multiple accounts, they can use the identity information of family members or relatives to register, which reduces the number of accounts but also lowers the probability of being subjected to platform risk control, and can to some extent ensure the safety of the assets in the accounts. If they purchase accounts from cryptocurrency studios they have never met online, once these accounts are frozen by the exchange's risk control, recovery may be difficult if the studio does not cooperate, leading to asset loss.
On the other hand, cryptocurrency studios selling exchange accounts registered with other people's identity information face significant criminal risks if such accounts fall into the hands of criminals, as they can easily be used for fraud, money laundering, and other criminal activities.