Recently, a case ruled by the Beijing Second Intermediate People's Court has attracted widespread attention: a man named Liu was sentenced to three years and six months in prison for assisting in the transfer of fraudulently obtained funds through the sale of USDT (Tether), charged with the crime of 'concealing or disguising criminal proceeds'. This case is not only a precise strike against illegal activities using cryptocurrencies but more importantly, it clearly conveys a key message to the market—that judicial authorities are increasingly adopting the legal standard of 'should have known' in determining such crimes. This means that the path of exonerating oneself with the excuse of 'unawareness' is being completely blocked, and any individual participating in abnormal virtual currency transactions may be recognized as a link in the criminal chain, facing severe criminal liability.
'Should have known' standard
According to the case details disclosed by the Beijing Second Intermediate People's Court, the core facts of this case are not complicated. In August 2024, the defendant Liu, aware that the cash held by He was criminal proceeds, still chose to sell USDT to him and received 200,000 RMB in cash in person. Subsequent investigations confirmed that this cash originated from a telecom fraud case. Although Liu may not have directly participated in the upstream fraud, through the USDT transaction, he objectively helped the criminals launder the illicit funds, making them difficult to trace.
The court ultimately ruled that Liu knowingly assisted in the transfer of criminal proceeds, and his actions constituted the crime of 'concealing or disguising criminal proceeds' as stipulated in Article 312 of the Criminal Law. Accordingly, the court issued a first-instance judgment: sentencing Liu to three years and six months in prison and imposing a fine of 40,000 RMB, while confiscating all his illegal gains.
The judge handling the case specifically pointed out in an interview that defendants in such cases generally exhibit two psychological characteristics: first, a typical profit-seeking mentality, taking risks to earn so-called 'transaction fees' or 'price differences'; second, a sense of luck, believing that virtual currency transactions are anonymous and concealed, making it difficult for judicial authorities to detect them. Even if detected, the consequences would not be too serious. However, the judgment in Liu's case undoubtedly serves as a wake-up call for those harboring similar illusions: the law's net is vast and meticulous; utilizing new technologies for crime is equally difficult to escape from the law.
The biggest legal highlight of this case lies in the determination of the subjective element of 'knowing'. In traditional criminal cases, 'knowing' usually means that the actor is fully aware that the assets they are dealing with are criminal proceeds. However, in new types of crimes such as virtual currency money laundering, upstream criminals often do not directly inform downstream 'money launderers' of the true source of funds. So, how do judicial authorities determine that the actor subjectively 'knew'?
Combining the relevant judicial interpretations issued by the Supreme People's Court and the Supreme People's Procuratorate in recent years, as well as case precedents from various local courts, a clear trend is that the connotation of 'knowing' is being expanded, extending from 'certain knowledge' to 'should have known' (also referred to as 'or knowledge' or 'presumed knowledge'). This means that even if the actor claims to be unaware that the funds are dirty money, as long as there are many anomalies in the transaction itself that would arouse suspicion in a person with normal cognitive abilities, the law can presume that they 'knew'.
In the field of virtual currency transactions, the following situations are highly likely to be regarded as 'should have known':
Abnormal transaction prices: conducting transactions at prices significantly higher or lower than the market fair price. For instance, upstream criminals willing to buy USDT with cash at prices far above the market price to quickly dispose of stolen goods, such unreasonable 'premiums' are dangerous signals in themselves.
Abnormal transaction methods: insisting on using large amounts of cash for face-to-face transactions or communicating through highly encrypted, non-mainstream chat software to deliberately evade traceable online transfers.
Transaction patterns without reasonable explanations: frequently trading with strangers of different identities, with funds exhibiting typical money laundering characteristics such as 'quick in and out' and 'distributed inflow, concentrated outflow'.
Deliberately evading regulation: after receiving risk control warnings from banks or payment institutions, still continuing relevant transactions by changing accounts or borrowing others' accounts.
In reviewing a similar case, the Weihai Court in Shandong clearly pointed out that understanding 'knowing' to include both 'certain knowledge' and 'or knowledge' better aligns with the legislative intent and is beneficial for combating the complete profit chain of cybercrime. The judgment in Liu's case again confirms this judicial practice: even if he claims to be just a 'seller of USDT', the act of receiving a large amount of cash for transactions itself has already crossed the legal red line.
Anti-money laundering storm
The case of Liu is not an isolated incident, but rather a reflection of China's ongoing efforts to intensify the crackdown on crimes related to virtual currencies in recent years. Since the People's Bank of China and ten other ministries issued a notice (on further preventing and handling the risks of speculation in virtual currency transactions) in 2021, which comprehensively banned activities related to virtual currencies, supportive legal measures have been continuously upgraded and improved.
On August 19, 2024, the Supreme People's Court and the Supreme People's Procuratorate of China jointly issued a new judicial interpretation of the Anti-Money Laundering Law, explicitly listing 'transactions through virtual assets' as one of the means of money laundering for the first time. The interpretation also stipulates that if the amount of money laundering exceeds 5 million RMB, it constitutes 'serious circumstances' and may face a prison sentence of more than five years and less than ten years.
Data further illustrates the severity of the issue. According to disclosures from the Supreme People's Procuratorate, the number of people prosecuted for money laundering crimes by procuratorial organs nationwide reached 2,971 in 2023, an increase of nearly 20 times compared to 2019. Behind this astonishing growth, cases involving money laundering using virtual currencies like USDT account for a significant portion. From the Qingdao USDT money laundering case with an amount involved as high as 8 million, to the case in Beijing where the main perpetrator was sentenced to 14 years for a case involving 19.5 million dollars, to various new types of crimes using digital RMB for money laundering, judicial authorities are weaving a three-dimensional crackdown network covering both online and offline, domestic and international.
Luck is no longer an option
The case in which Liu was sentenced to three and a half years acts like a prism, reflecting China's current firm stance of 'zero tolerance' toward illegal financial activities in the virtual currency field. For individuals and teams still active in the over-the-counter (OTC) market, this is undoubtedly an extremely dangerous signal. The past era of attempting to navigate the legal gray area, using 'I didn't know the source of the money' as a shield, is gone forever.
The court's ruling and the judge's reminders repeatedly emphasize a core principle: everyone should be responsible for their own actions and cannot place themselves in immense legal risk under the guise of seeking small profits. When the profit from a transaction is unreasonably high, when the transaction method deliberately avoids regulation, and when the identity of the other party is shrouded in secrecy, every participant 'should have known' that there are enormous risks lurking behind.
