This article reviews multiple recent judicial cases in China related to cryptocurrency, analyzing crimes like illegal business operations, money laundering, fraud, and pyramid schemes. Through real judgments, it reveals the serious legal risks and criminal responsibilities hidden behind activities such as issuing coins, OTC trading, and stealing crypto assets. This article is sourced from a piece by Wenser, compiled and written by Odaily Planet Daily.
(Previous summary: China's 'stablecoin ban order' prohibits the public from discussing it: choking the dollar phantom, quietly creating a yuan ark in Hong Kong.)
The cryptocurrency industry has long been a dark forest, requiring both vigilance against on-chain security threats and caution against the legal sword of reality. This is especially true for the young demographic who may not yet be worldly; the criminal risk boundaries behind activities like issuing coins, OTC trading, and manipulating liquidity pools are often vaguely understood.
To enhance risk prevention awareness, Odaily Planet Daily will review recent typical judicial cases involving virtual currency in China and analyze key legal risk points (Note: This article is for legal reference only and does not constitute legal advice; specific clauses are subject to official interpretations).
Charge One: Reselling foreign exchange constitutes illegal business operations, with the amount involved exceeding 200 million yuan.
The Supreme Court released a typical case showing that the Intermediate People's Court of Leshan, Sichuan, conducted a higher-level review of a case involving the illegal buying and selling of foreign exchange using USDT.
Between 2020 and 2021, Wan and others illegally traded foreign exchange through 'RMB-USDT-USD', involving over 234 million yuan. The court determined that they constituted illegal business operations, with the main offender Wan sentenced to 13 years and 6 months in prison and fined 1.14 million yuan; defendants Huang and Chen were 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. After the first-instance judgment, the defendants accepted the verdict, and the prosecution did not appeal, so the judgment has taken legal effect.
Additionally, there are 2 other cases also involving illegal business operations, listed together here:
Firstly, in December 2022, the Dapu County People's Court pronounced a judgment on a cash trading virtual currency case, sentencing the principal offender Chen to eight months in prison for illegal business operations and fined him 20,000 yuan; sentencing the accomplice Li to six months and ten days in prison and fined 1,000 yuan; and lawfully confiscating the illegal gains of 5,101,770 yuan, remitting them to the state treasury.
It is reported that in November 2021, Chen began cash trading of virtual currencies, purchasing USDT from known individuals in the cryptocurrency market and reselling it to buyers, profiting from the price difference. The price for each transaction was set by the buyer, who compared the price of one U coin with the market price of other virtual currencies on that day to calculate profitable rates. Since each transaction involved a large amount of cash, Chen was worried about being robbed, so he hired Li as a bodyguard to escort the cash for transactions with retail investors. After hearing the case, the court believed that Chen and Li, by using the form of virtual currency trading to disguise foreign exchange trading, had serious circumstances and constituted illegal business operations.
Secondly, three 'post-95' young men engaged in foreign exchange 'business' using cryptocurrency trading as a medium, completing over 650 transactions in a few months, exchanging nearly 30 million yuan in foreign exchange. After the Jianhu County Prosecutor's Office filed public prosecution, Lin and the other three were ultimately sentenced to prison terms ranging from five years to one year and six months, each fined. The prosecutor's review found that Lin and the others used virtual currency as a medium to provide cross-border exchange and payment services to profit from the exchange rate differences, circumventing national foreign exchange regulations, affecting the effectiveness of foreign exchange management and the stability of legal exchange rates, thus disrupting the normal financial market order, and should be prosecuted for illegal business operations.
Odaily Planet Daily's sharp commentary: It is well known that China's foreign exchange control regulations limit individuals to an annual exchange quota of about 50,000 USD, while the decentralization and anonymity of cryptocurrencies provide certain conveniences for foreign exchange handling and trading, thus posing certain legal risks. The first case involves a huge amount of money and a long time span of criminal activity, thus it is considered a typical case for accurate legal application and appropriate judicial guidance. The situations in the second and third cases are similar, but perhaps due to relatively lighter circumstances, the corresponding punishments are also relatively lighter.
Charge Two: Money laundering, with bank transaction volume of 25,000 yuan and illegal profits exceeding 5,000 yuan.
On July 26, 2024, the Liyang City People's Court made a judgment on a virtual currency money laundering case. A jobless man known as Xiao Wu was sentenced to six months in prison, with a one-year reprieve, and fined 2,000 yuan for participating in virtual currency money laundering activities.
Case details show that in November 2023, Xiao Wu, to repay credit card debts incurred during university from forex and virtual currency investments, contacted a 'money laundering company' via Telegram. He purchased U coins on a trading platform and then transferred and sold them through the 'U-MATOU' APP, earning a profit from the price difference.
On December 22, 2023, the Zhongguancun Police Station of Liyang City received a report from the public stating that they were defrauded of 3,830 yuan through a '刷单' scheme. Preliminary investigations by the police revealed that 2,520 yuan was transferred to Xiao Wu's bank account, which involved Xiao Wu's bank account. Investigations found that Xiao Wu's bank account had a total transaction volume of 13 transactions, amounting to over 25,000 yuan, with illegal personal gains exceeding 5,000 yuan.
Odaily Planet Daily's sharp commentary: Money laundering is also one of the high-frequency crimes in the cryptocurrency industry. Regardless of whether it is domestic or overseas, regardless of the scale or the background of the involved personnel, there is a certain risk of money laundering, especially for individuals using their bank cards to help illegal companies move funds domestically and abroad, which can easily constitute a crime of assisting in money laundering.
Charge Three: Fraud, post-00s college student sentenced to four years and six months in prison and fined 30,000 yuan after issuing '土狗币' and withdrawing liquidity.
After issuing the '土狗币' BFF on the BNB Chain, post-00s college student Yang Qichao was found to have caused others to lose 50,000 USDT due to liquidity withdrawal, and was sentenced to four years and six months in prison for fraud by the People's Court of Nanyang, Henan.
On May 20, 2024, the case was heard in the second instance at the Intermediate People's Court of Nanyang. Yang Qichao's defense lawyer still argued for his innocence, stating that the virtual currency issued by the defendant Yang Qichao has a unique and unalterable contract address, and there is no so-called 'fake currency'. Both the defendant and the complainant are experienced players in the coin circle, with a clear understanding of the risks involved in virtual currency speculation.
Moreover, the platform allows for the addition or withdrawal of liquidity at any time, and the defendant's actions did not violate platform rules. Furthermore, the BFF coins held by the victim appreciated due to increased liquidity after the incident, and if traded, could be exchanged for more USDT than before, indicating that the victim did not incur any losses. Born in 2000, Yang Qichao was a soon-to-graduate senior at a university in Zhejiang before the incident.
He created a token named BFF that matched the English name of the organization '区动未来', adding liquidity of 300,000 BSC-USD and 630,000 BFF. In the same second that Yang Qichao added liquidity, Luo spent 50,000 USDT to exchange for 85,316.72 BFF. Merely 24 seconds later, Yang Qichao withdrew the liquidity of BFF, causing Luo to exchange 81,043 BFF for only 21.6 USDT. Luo traced Yang Qichao through a mutual WeChat friend. Luo requested Yang Qichao to refund his losses, which was refused.
On May 3, 2022, Luo reported to the police that he was defrauded of more than 300,000 yuan in virtual currency investment (equivalent to 50,000 USDT). Soon after, the police filed a criminal case for suspected fraud and arrested Yang Qichao in November of the same year in Hangzhou, Zhejiang.
Odaily Planet Daily's sharp commentary: Yes, issuing coins and withdrawing liquidity strictly constitutes a crime, especially when someone suffers property losses and can identify the issuer. According to informed sources, Yang is a 'professional scammer' posing as a legitimate project, often launching and withdrawing liquidity under the guise of legitimate projects at the same time, making him a 'career habitual offender'. According to previous news reports, the suspects even boasted, 'I'm just taking back what the big brother cut from me; I've been cut too.' We remind all users to comply with domestic laws and regulations and not to participate in coin issuance activities.
Charge Four: Organizing and leading pyramid schemes, with the highest amount involved reaching over 210 million yuan.
In November 2024, according to the public account of the Yunnan Provincial People's Procuratorate, a recent case of organizing and leading pyramid schemes involving Li and ten others was prosecuted by the Shidian County Prosecutor's Office. After court trial, Li and the other ten defendants were sentenced to prison terms ranging from 6 years to 2 years for the crime of organizing and leading pyramid schemes, with fines ranging from 500,000 yuan to 100,000 yuan.
Since May 2021, Li gathered Huang, Jin, and others, using 'blockchain' and 'virtual currency' as gimmicks to seek illegal profits by purchasing and holding virtual digital currency A and issuing virtual digital currencies B and C. They set up five funds on an online platform and combined offline and online methods through live meetings and WeChat groups, creating a successful persona, leveraging their special professional backgrounds, and promoting slogans like 'one coin, one mansion; one coin, one luxury car; earn hundreds of thousands in a day easily', and widely publicizing the reward system and profit prospects, enticing the public to purchase, destroy, or add funds to qualify for participation and complete assigned tasks, thus obtaining static dividends and dynamic returns based on the number of people developed and the investment amount, forming five levels of rebates.
According to identification, Li and others collected a total of over 210 million yuan from pyramid scheme funds using an online platform. The Shidian County Prosecutor's Office reviewed and found that Li used virtual currency as a gimmick, collaborating with nine other defendants to defraud property via an online platform, disrupting economic and social order, with pyramid scheme funds accumulating to over 210 million yuan, which was serious. The actions of Li and the other ten violated Article 224-1 of the Criminal Law of the People's Republic of China, constituting the crime of organizing and leading pyramid schemes. After court deliberation, the above judgment was made.
In September of the same year, the Zhongxiang City Prosecutor's Office in Hubei Province filed public prosecution against Chen and two others for organizing and leading pyramid schemes. After lawful judgment, Chen and the other two were sentenced to three years in prison, with a five-year reprieve, and fined 350,000 yuan. According to police investigations, a pyramid scheme organization led by Chen, Ding, and Fu decided to issue their own virtual currency for profit. The three agreed on promotion models, reward systems, and profit distribution mechanisms, and traveled to find Lu, the head of a software design company (handled in another case), to develop a virtual currency software APP. In February 2022, the APP officially launched. On February 19 of the same year, Chen and the other two held a press conference for the APP, inviting friends to participate in the virtual currency project, while also establishing a pyramid scheme organization named '某某社区' under the guise of investing in the virtual currency project. To improve promotional efficiency, the three used online platforms and held offline training sessions across the country to promote the virtual currency project, developing members through '某某社区', enticing others to invest in purchasing virtual currency to become members and develop downlines. The prosecuting attorney explained that the three provided corresponding rebates to upper-level members based on the number of downlines and the amounts paid by downline members, forming an upper-lower level hierarchy. After months of meticulous promotion, the organization rapidly expanded. To facilitate management, the three divided the organization into five major districts and sixteen vanguard groups, appointing key members to be responsible for each. Every day, the five major districts organized morning meetings for members through online chat software, calling upon members to complete the assigned performance tasks.
By the time of the incident, the APP had over 10,000 registered member accounts, with a maximum level of 17 levels, and the amount involved reached over 57 million yuan. 'This virtual currency has no actual value, and the project has no real business activities; it relies entirely on continuously developing downlines to maintain operations. The money earned by the upper level is essentially just the funds invested by the downline. Once there are no continuous investments from downlines, the project will collapse.' The prosecuting attorney explained that Ding, Fu, and Chen directly or indirectly developed more than 41 downlines through the APP, and their organizational form constituted a pyramid scheme within the meaning of criminal law. On January 11, 2023, Chen, Ding, and Fu were arrested by the police, and after their arrest, all truthfully confessed to the criminal facts and voluntarily returned all illegal gains amounting to over 22.59 million yuan. On December 22, 2023, the case was transferred to the Zhongxiang City Prosecutor's Office for public prosecution. The prosecuting attorney believed that Chen, Ding, and Fu's actions were clear in fact and evidence, and their behavior violated Article 224-1 of the Criminal Law of the People's Republic of China, constituting the crime of organizing and leading pyramid schemes. After the case was lawfully prosecuted by the court, the local court made the above judgment.
Odaily Planet Daily's sharp commentary: Cryptocurrencies are often a hotspot for pyramid scheme crimes and a common packaging method, which is a major reason why many people in China 'fear coins'. In the two cases mentioned above, one pyramid scheme had as many as 5 levels; the other reached an exaggerated 17 levels, far exceeding the domestic distribution limit of 3 levels, and the scale of funds involved reached tens of millions to even billions of yuan, thus being listed as a representative major case.
Charge Five: Concealing and hiding criminal proceeds, with the amount involved reaching over 15 million yuan.
In March 2021, the Luyi County People's Procuratorate issued a second-instance judgment on a case involving the use of Bitcoin for '跑分'. The judgment showed that seven suspects used mobile phones through virtual currency trading platforms and other 'Bitcoin' software to '跑分' by buying and selling virtual currencies, with the amount involved exceeding 9 million. However, among the seven suspects who received commissions for '跑分', the highest income was only 8,500 yuan, and the lowest was merely 500 yuan. The Luyi County People's Procuratorate sentenced the seven suspects for concealing and hiding criminal proceeds, with the highest prison term being four years and the highest fine being 10,000 yuan.
In March 2022, a couple used their virtual currency accounts to launder over 15 million yuan for upstream crimes, earning what they called '搬砖费'. After prosecution by the Xihu District Prosecutor's Office in Hangzhou, this case involving virtual currency 'pig-butchering' money laundering was judged in early March this year. Ultimately, Zhang and Chen, the couple, were sentenced to three years and ten months in prison, fined 10,000 yuan; and three years in prison, with a three-year reprieve and fined 8,000 yuan.
In August 2023, the Mawei District Prosecutor's Office in Fuzhou, Fujian Province, filed a public prosecution against defendant Chen for concealing and hiding criminal proceeds. In February 2022, Chen received a call from Lin, guiding him to download a certain chat software and, as instructed, send two bank cards under his name to the chat group. Soon, the two cards received seven transfers, generating a bank transaction volume of 99,609 yuan. Subsequently, Chen continued to follow Lin's guidance, transferring the money from the cards to his Alipay and WeChat accounts, and then to his third bank account. Finally, Chen purchased virtual U coins worth 94,988 yuan from a seller and sent the transaction screenshot to the chat group to complete the transaction, earning a commission of 147.1 yuan. Ultimately, the court sentenced Chen to nine months in prison, with a one-year reprieve, and fined him 5,000 yuan. The prosecutor stated: Fraud groups use virtual currency to transfer and launder illicit funds, and such behavior, which is disguised as purchasing virtual currency for online money laundering, constitutes a legal violation when one is aware that others are committing crimes using the information network and provides assistance.
Odaily Planet Daily's sharp commentary: In this charge, the parties involved in the case earned less than 150 yuan, yet were sentenced to nine months in prison, and the fines were significantly higher than the earned commissions. It must be said that whether one is engaged in '跑分'-type commission activities or helping others launder money, both are highly risky behaviors, and it is hoped that everyone can learn from this.
Charge Six: Illegally obtaining computer information, with maximum profits exceeding 2.5 million yuan.
In October 2023, a group consisting of Lin, Chen, and three others financed the establishment of a fake '跑分' website, embedding a purchased Trojan virus in the website's links, and then lured victims to click the links using chat software, subsequently remotely controlling computers to steal virtual currency. The five stole a total of 3,000 USDT coins worth 18,000 yuan. In March 2022, the five were arrested by the police, and the public prosecution agency brought them to court.
The Guangzhou Haizhu Court ultimately ruled that the five defendants were sentenced to prison terms ranging from 6 months to 2 years for illegally obtaining computer information, with fines ranging from 3,000 to 12,000 yuan.
In June 2024, three employees from the cybersecurity company 360 were sentenced for stealing others' virtual currencies. The Xuhui District Procuratorate of Shanghai accused that from February 9 to 20, 2023, Hong, along with Yang and Zhang (both handled in other cases), used vulnerabilities in the Yapi remote program to gain access to the target virtual currency website. They controlled the internal network server through lateral penetration and Trojan implantation, found the server's original code, and downloaded it to analyze the victim Su's virtual wallet address, private key, etc., and constructed false commands to transfer virtual currencies from the victim's wallet address. They later exchanged it for other virtual currencies and sold it, obtaining illegal gains of over 2.5 million yuan.
Odaily Planet Daily's sharp commentary: It is worth mentioning that cryptocurrencies have been recognized as personal assets by many local courts. Therefore, the act of stealing cryptocurrencies through Trojan viruses and other means is regarded as illegally obtaining computer information, and there is also a significant chance of being seen as theft or robbery.
For instance, the People's Court of Shijingshan District in Beijing and the Beijing First Intermediate People's Court heard a civil dispute over Litecoin investment in 2022. They ultimately determined that, in nature, Litecoin should be considered a specific virtual commodity, not having the same legal status as currency, and should not be used as currency for circulation in the market. However, Litecoin possesses attributes of virtual property and virtual commodities and should be legally protected. The Chaoyang District People's Court in Beijing heard a case involving Bitcoin robbery, ultimately determining that virtual currencies are not a legal currency form, but this does not affect the property attributes of virtual currencies. Virtual currencies have property attributes in the criminal law sense and can be the object of property crimes; ultimately, a group of defendants was convicted of robbery for violently and coercively stealing others' Bitcoin.