Profit of 150 yuan, sentenced to 9 months in prison, don't underestimate the seriousness of the amount.
Written by: Wenser
The cryptocurrency industry has always been a dark forest, requiring vigilance against on-chain security threats as well as the legal swords of the real world. This is especially true for the young and inexperienced, where the criminal risks behind activities such as issuing tokens, OTC trading, and manipulating liquidity pools are often poorly understood.
To enhance risk awareness, Odaily Planet Daily has compiled typical judicial cases involving cryptocurrencies in recent years, analyzing key legal risk points (Note: This article is for legal reference only and does not constitute legal advice; specific terms are subject to official interpretation).
Charge One: Reselling foreign exchange constitutes illegal business operations, with an amount involved exceeding 200 million yuan
The Supreme Court released a typical case showing that the Intermediate People's Court of Leshan, Sichuan, elevated the trial of a case involving illegal foreign exchange trading using USDT.
Between 2020 and 2021, Wan Mouyuan and others illegally traded foreign exchange through the "RMB—USDT—USD" method, with an amount involved exceeding 234 million yuan. The court determined that they constituted illegal business operations, sentencing the principal offender Wan Mouyuan to 13 years and 6 months in prison, along with a fine of 1.14 million yuan; defendants Huang Mouyuan and Chen Mouwen were sentenced to 5 years and 6 months, and 2 years and 6 months in prison respectively, with fines of 710,000 yuan and 250,000 yuan. After the first-instance verdict, the defendants accepted the judgment and the prosecution did not appeal, making the judgment legally effective.
There are also two other cases that similarly involve illegal business operations, listed here:
First, in December 2022, the People's Court of Dapu County ruled on a cash trading virtual currency case, sentencing the principal offender Chen Mou to 8 months in prison for illegal business operations, along with a fine of 20,000 yuan; co-offender Li Mou was sentenced to 6 months and 10 days in prison, with a fine of 1,000 yuan; and the illegal gains of 5,101,770 yuan were confiscated and turned over to the national treasury.
It is reported that in November 2021, Chen began cash trading virtual currency, purchasing USDT from acquaintances in the crypto community and reselling it to buyers for profit. The price for each transaction was set by the buyer, who compared the price of 1 USDT with the prices of other virtual currencies on that day to calculate a profitable price. Due to the large amounts of cash involved in each transaction, Chen hired Li as a bodyguard to escort the cash during trades with retail investors to avoid robbery. The court found that Chen and Li used the form of virtual currency trading to indirectly trade foreign exchange, which was serious enough to constitute illegal business operations.
Second, three "post-95" young men engaged in foreign exchange trading using virtual currency as a medium, completing over 650 transactions in just a few months, exchanging nearly 30 million yuan in foreign exchange. The Jianhu County Prosecutor's Office filed a public prosecution, and Lin and the other two were ultimately sentenced by the court to prison terms ranging from 5 years to 1 year and 6 months, along with fines. The prosecutor's review concluded that Lin and the others used virtual currency as a medium to provide cross-border exchange and payment services to profit from exchange rate differences, circumventing national foreign exchange regulations, affecting the effectiveness of foreign exchange management and the stability of legal exchange rates, and disrupting the normal order of the financial market, thus should be held criminally liable for illegal business operations.
Odaily Planet Daily's sharp commentary: It is well known that domestic foreign exchange control regulations limit individuals to an annual exchange quota of around 50,000 USD, while the decentralization and anonymity of cryptocurrencies provide certain conveniences for foreign exchange processing and trading, thus posing legal risks. The first case involved a huge amount and a long duration of criminal activity, making it a typical case of elevated jurisdiction with accurate legal application, appropriate judgment guidance, and significant demonstrative meaning. The second and third cases are similar, but due to relatively lighter circumstances, the corresponding penalties were also relatively lighter.
Charge Two: Money laundering, bank flow of 25,000 yuan, illegal profit of over 5,000 yuan
On July 26, 2024, the People's Court of Liyang City, Jiangsu Province, ruled on a virtual currency money laundering case. A jobless man, known as Xiao Wu, was sentenced to 6 months in prison, with a 1-year probation, and fined 2,000 yuan for participating in virtual currency money laundering activities.
The case shows that in November 2023, Xiao Wu contacted a "money laundering company" through Telegram to repay credit card debts incurred during his university years from investing in foreign exchange and virtual currencies. He purchased USDT on a trading platform and then transferred and sold it through the "U-MATOU" app, profiting from the price difference.
On December 22, 2023, the Zhongguancun Police Station in Liyang City received a report from a citizen claiming to have been scammed out of 3,830 yuan through "order brushing." Preliminary investigations revealed that 2,520 yuan was transferred to Xiao Wu's bank card, involving his bank account. Investigations showed that Xiao Wu's bank account had a total flow of 13 transactions, amounting to over 25,000 yuan, with personal illegal profits exceeding 5,000 yuan.
Odaily Planet Daily's sharp commentary: Money laundering is also one of the high-frequency crimes in the cryptocurrency industry, whether domestically or overseas, regardless of the scale or the background of the individuals involved, there is a certain risk of money laundering, especially when individuals use their bank cards to assist illegal companies in transferring funds domestically and internationally, which can easily constitute aiding and abetting.
Charge Three: Fraud, post-00s college student issues "Dogecoin" and then withdraws liquidity, sentenced to 4 years and 6 months and fined 30,000 yuan
Post-00s college student Yang Qichao issued "Dogecoin" BFF on the BNB Chain and was found to have caused others a loss of 50,000 USDT by withdrawing liquidity. The People's Court of the High-tech Industrial Development Zone in Nanyang, Henan Province, first-instance ruled him guilty of fraud, sentencing him to 4 years and 6 months in prison and a fine of 30,000 yuan.
On May 20, 2024, the case was heard in the second instance at the Intermediate People's Court of Nanyang City. Yang Qichao's defense lawyer continued to argue for his innocence, stating that the virtual currency issued by the defendant had a unique and unalterable contract address, and there was no so-called "fake currency." Both the defendant and the complainant were experienced players in the crypto community, with a clear understanding of the risks of speculating on virtual currencies. Furthermore, the platform allowed liquidity to be added or withdrawn at any time, and the defendant's actions did not violate platform rules. Additionally, 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, meaning the victim did not incur any loss. Born in 2000, Yang Qichao was a senior student about to graduate from a university in Zhejiang before the incident. In early May 2022, he became aware of a community autonomous organization called "Blockchain Future DAO" for the promotion and preheating of decentralized virtual tokens. He created a token named BFF, identical to the English name of Blockchain Future, adding liquidity of 300,000 BSC-USD and 630,000 BFF. At the same second Yang added liquidity, Luo spent 50,000 USDT to exchange for 85,316.72 BFF, and just 24 seconds later, Yang withdrew the liquidity of BFF, causing Luo to only exchange 21.6 USDT for 81,043 BFF. Luo traced back through a mutual WeChat friend and found Yang. Luo requested Yang to refund his losses, which was refused.
On May 3, 2022, Luo reported to the police, claiming to have been defrauded of over 300,000 yuan in virtual currency (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 tokens and withdrawing liquidity can strictly be considered a crime, especially when someone suffers property losses and the specific issuer can be identified. According to informed sources, Yang is a "professional scammer" who often uses the names of legitimate projects to launch and withdraw liquidity at the same time, making him a "career habitual offender." Previous news reports indicated that the perpetrators even claimed, "I just took back a bit of what the big brother cut from me; I’ve been cut too." This serves as a reminder to users to strictly adhere to domestic laws and regulations and refrain from participating in token issuance activities.
Charge Four: Organizing and leading pyramid selling activities, with the highest amount involved reaching over 210 million yuan
In November 2024, according to the official account of the Yunnan Provincial People's Procuratorate, a recent case of organizing and leading pyramid selling activities involving Li and 10 others was prosecuted by the Shidian County Procuratorate. After court hearings, the 10 defendants, including Li, were sentenced to prison terms ranging from 6 years to 2 years for organizing and leading pyramid selling activities, along with fines ranging from 500,000 yuan to 100,000 yuan.
Since May 2021, Li has gathered Huang, Jin, and others, using "blockchain" and "virtual currency" as a gimmick to seek illegal profits. They set up 5 funding pools on an online platform under the pretext of purchasing and holding virtual digital currency A and issuing virtual digital currencies B and C, using a combination of offline meetings and online WeChat groups to create a successful persona, leveraging special professional backgrounds, and promoting slogans like "one coin, one mansion; one coin, one luxury car" and "earn hundreds of thousands or millions easily in a day," to lure the public into obtaining membership qualifications through purchasing, destroying, or adding to the funding pools, and completing assigned tasks to receive static dividends and dynamic returns based on the number of people developed and investment amounts, forming 5 levels of rebates.
According to assessments, the pyramid selling funds collected by Li and others through the online platform totaled over 210 million yuan. The Shidian County Procuratorate reviewed that Li used virtual currency as a gimmick, colluding with the other nine defendants to defraud property and disrupt the economic and social order, with the total pyramid selling funds reaching over 210 million yuan, which was serious in nature. 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 selling activities. The court then made the above judgment.
In September of the same year, the People's Procuratorate of Zhongxiang City, Hubei Province, prosecuted Chen and two others for organizing and leading a pyramid scheme. After legal proceedings, Chen and the others were sentenced to 3 years in prison, with a 5-year probation, and fined 350,000 yuan. Police investigations revealed that a pyramid scheme led by Chen, Ding, and Fu aimed to issue a self-created virtual currency for profit. The three agreed on a promotion model, reward system, and profit distribution mechanism, and traveled to another city 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 went live. On February 19 of the same year, Chen and the others held a launch event for the app, inviting friends to participate in the virtual currency project, while also establishing a pyramid scheme called "Certain Community" under the guise of investing in the virtual currency project. To improve promotion efficiency, the three used internet platforms and held offline training sessions nationwide to promote the virtual currency project, developing members through "Certain Community," enticing others to invest in purchasing virtual currency to become members and recruit downlines. The prosecuting attorney explained that Chen and the others provided corresponding rebates to upper-level members based on the number of downlines and the payment amounts of downline members, forming a hierarchical structure. After several months of careful promotion, the organization rapidly expanded. To facilitate management, the three divided the organization into five major regions and sixteen vanguard groups, appointing key members to be responsible for each. The five major regions organized morning meetings for members daily through online chat software, urging members to complete assigned performance tasks.
By the time of the incident, the app had over 10,000 registered member accounts, with the highest level reaching 17 layers, and the amount involved exceeded 57 million yuan. "This virtual currency has no actual value, and the project has no real business activities, relying solely on the continuous development of downlines to maintain operations. The profits for upper-level members essentially come from the money invested by downline members. Once there are no continuous investments from downlines, the project will collapse," the prosecuting attorney explained. Ding, Fu, and Chen developed over 41 downlines directly or indirectly through the app, and their organizational structure constituted a pyramid scheme in the legal sense. On January 11, 2023, Chen, Ding, and Fu were arrested by the police. After their arrest, all three truthfully confessed to their criminal activities 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 Procuratorate for prosecution. The prosecuting attorney believed that the actions of Chen, Ding, and Fu were clear in fact, with sufficient evidence, and 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 selling activities. The procuratorate subsequently filed a public prosecution, and the local court made the aforementioned judgment.
Odaily Planet Daily's sharp commentary: Cryptocurrencies are often a hotspot for pyramid scheme crimes and a common packaging method, which is a significant reason why many people in China are wary of cryptocurrencies. 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, with the amount involved in the tens of millions to over a hundred million yuan, thus classified 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 People's Procuratorate of Luyi County, Henan Province, issued a second-instance judgment on a case involving the use of Bitcoin for "scoring." The judgment showed that seven suspects used their phones to conduct "scoring" through virtual currency trading platforms and other "Bitcoin" software, with an amount involved exceeding 9 million yuan. However, among the seven suspects who received commissions for "scoring," the highest income was only 8,500 yuan, while the lowest was just 500 yuan. The People's Procuratorate of Luyi County sentenced the seven suspects to a maximum of 4 years in prison for concealing and hiding criminal proceeds, with fines of up to 10,000 yuan.
In March 2022, a couple used their virtual currency accounts to launder over 15 million yuan for upstream criminals, earning so-called "arbitrage fees." After being prosecuted by the Xihu District Procuratorate in Hangzhou, the case involving money laundering through a virtual currency "pig butchering" scheme was judged in early March this year. Ultimately, Zhang and Chen, the couple, were sentenced to 3 years and 10 months in prison, with a fine of 10,000 yuan; and 3 years in prison, with a 3-year probation, and a fine of 8,000 yuan.
In August 2023, the People's Procuratorate of Mawei District, Fuzhou City, filed a public prosecution against defendant Chen for concealing and hiding criminal proceeds. In February 2022, Chen received a call from Lin, who guided him to download a certain chat software and instructed him to post two bank cards under his name in the chat group. Soon, the two bank cards received seven transfers, generating a bank flow of 99,609 yuan. Subsequently, Chen continued to follow Lin's instructions, transferring the money in the cards to his Alipay and WeChat accounts, and then to his third bank card. 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 9 months in prison, with a 1-year probation, and fined him 5,000 yuan. The prosecutor stated: Fraud gangs use virtual currencies to transfer and launder illicit funds. This behavior of conducting online money laundering under the guise of purchasing virtual currencies, while knowing that others are committing crimes using information networks and still providing assistance, has already violated the law.
Odaily Planet Daily's sharp commentary: In this charge, the parties involved made profits of less than 150 yuan, yet the final sentence reached 9 months, and the fines were much higher than the commission earned. It must be said that whether engaging in "scoring" commission activities or helping others launder money, both are highly risky behaviors, and it is hoped that everyone will take heed.
Charge Six: Illegally obtaining computer information, with profits exceeding 2.5 million yuan
In October 2023, a gang consisting of Lin, Chen, and three others funded the construction of a fake scoring website and implanted a purchased Trojan virus in the website link. They then used chat software to lure victims into clicking the link, subsequently remotely controlling computers to steal virtual currencies. 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 prosecution later 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, along with fines ranging from 3,000 to 12,000 yuan.
In June 2024, three employees of the cybersecurity company 360 were sentenced for stealing others' virtual currencies. The Xuhui District People's Procuratorate of Shanghai accused that from February 9 to 20, 2023, Hong, along with Yang and Zhang (both handled in separate cases), exploited a remote code execution vulnerability in Yapi to gain access to the target virtual currency website. They then controlled the internal network servers through lateral penetration and Trojan implantation, found the server source code, and downloaded and analyzed the victim Su's virtual wallet address, private key, etc., constructing false commands to transfer virtual currencies from the victim's wallet address. Afterward, they exchanged the stolen currencies for other virtual currencies and sold them, 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 methods such as Trojan viruses is regarded as illegal obtaining of computer information, and there is also a significant probability that it could be classified as theft or robbery.
For example, the Shijingshan District People's Court of Beijing and the First Intermediate People's Court of Beijing heard a civil dispute over Litecoin investment in 2022. They ultimately determined that, in nature, Litecoin should be considered a specific virtual commodity, lacking the legal status equivalent to currency, and should not be circulated as currency in the market. However, Litecoin possesses attributes of virtual property and virtual commodities, which should be legally protected. The Chaoyang District People's Court of Beijing once heard a robbery case involving Bitcoin, ultimately concluding that while virtual currencies are not a legal form of currency, this does not affect their property attributes. Virtual currencies have property attributes in the criminal law sense and can be the object of property crimes; ultimately, the defendants were convicted and punished for robbing others' Bitcoin using violence and coercion.
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