Author: Lawyer Liu Zhengyao

Introduction

On December 17, the Shanghai Second Intermediate People's Court published an article titled "Legal Uniformity in Cases Involving Virtual Currency Crimes" on its official account. This article was primarily co-hosted by the Shanghai Second Intermediate Court and the Law School of Renmin University of China, under the guidance of the Shanghai High Court and the Chinese Criminal Law Research Association, discussing virtual currency crime cases.

In fact, this seminar took place in November, but the Second Intermediate Court chose this timing to release the article, which is quite clever—recently, thirteen ministries and seven associations have issued documents regulating and even cracking down on virtual currency activities.

Virtual currencies, especially stablecoins (like USDT), have seen a surge in cases where they are used as "tools for crime" or "objects of crime" in current judicial practice. According to the seminar cases and opinions released by the Shanghai Second Intermediate Court, this will undoubtedly set the tone for the standards of identifying virtual currency crimes that are currently in a "gray area" (at least in the Shanghai region).

For crypto practitioners and legal professionals, this is not only a court judgment guide but also a risk checklist regarding where the "red line" lies. Today, we will first share cases related to virtual currency money laundering crimes and the court's views on how "subjective knowledge" is determined. In the future, Lawyer Liu will continue to write about "how to determine the completion of virtual currency money laundering crimes" and "virtual currency illegal business crimes."

I. Virtual Currency Money Laundering Crimes: Case Introduction and Court Views

The court cited two cases:

The first case: Cai had a large amount of U coins, which he sold online at a price 10% higher than the market price, making a profit of 1 million yuan. The court later found that the money others used to buy U from Cai was from fraudulent funds (a fundraising fraud case); Cai himself also admitted that selling U at a high price online was abnormal.

The second case: Yang sold USDT at a price 5 cents higher than the market price on TG, conducting over ten thousand transactions with multiple people within six months, making a profit of 1.2 million yuan. The court later found that 4.8 million yuan of the funds Yang received from selling U came from fraudulent funds.

What do you think are the differences between these two cases? Do both individuals constitute a crime?

The court's view is interesting, leaning towards the conclusion that neither Cai nor Yang can be recognized as having "subjective knowledge," meaning neither constitutes money laundering crime.

II. Court's Reasoning

First, the judgment of subjective knowledge for money laundering crimes must be limited to specific seven types of upstream crimes and their proceeds. Cai merely admitted that the price at which he sold U was abnormal but did not know he was assisting in financial fraud (one of the seven crimes of money laundering). The court actually has a more refined theoretical argument, but since this article is a legal popularization piece, Lawyer Liu will not elaborate further, just briefly introduce the court's views. For those who want to see the detailed argument process, you can refer to the earlier article from the Second Intermediate Court.

Second, although there are two types of recognition for "subjective knowledge" in money laundering crimes: knowing or should have known, "should have known" is not "could have known." In practice, there should be no analogical broad interpretation. What constitutes "should have known" should be judged based on the circumstances of the party's handling of others' criminal proceeds and their benefits, the types, amounts, transfer, and conversion methods of the criminal proceeds, the transaction behavior, and the abnormality of the funds and accounts, combined with their professional experience, relationships with upstream criminals, and other evidence in the case.

Third, in cases involving virtual currency money laundering crimes, it is necessary to "comprehensively consider the actor's choice to transfer and convert funds through virtual currency, as well as the transaction behavior, fund accounts, amounts, frequency, and other abnormal situations, especially their professional experience, the information they have received, their relationships with upstream criminals, or communication records, to make a correct determination of whether they possess subjective knowledge."

Fourth, regarding Yang, the court believes that although Yang engaged in high-frequency, small-amount transactions of USDT and earned a small profit margin, he did not significantly exceed a reasonable profit range and had not reached the level of presumed knowledge. Ultimately, the court also concluded that Yang did not engage in "money laundering" behavior (not constituting a concealment crime).

III. Final Thoughts

In Lawyer Liu's view, the two cases cited by the Shanghai court effectively illustrate that when individuals are buying and selling virtual currencies, especially stablecoins like USDT, in the absence of evidence of prior collusion, clear warnings, specific instructions, or abnormal communications between the parties and upstream criminals, and by comprehensively considering the background of the USDT trading parties, their professional experience, relationships with upstream criminals, and whether they have fulfilled reasonable review obligations, it is generally possible to cautiously determine whether the actor possesses subjective knowledge to prevent unreasonable objective attribution of guilt.

However, theory is always beautiful, and the harsh reality is something only the parties involved and their defense lawyers truly understand. The author only hopes that courts across the country can refer to the views of the Shanghai Second Intermediate Court when handling virtual currency money laundering cases.

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