Author: Lawyer Liu Zhengyao

Introduction

In the past two years, there has been an increasing number of criminal cases involving virtual currencies. In addition to the common cases of money laundering using virtual currencies, fraud involving virtual currencies, pyramid schemes, illegal gambling, and illegal foreign exchange trading, there has also been a rise in fraud and theft crimes involving individuals and virtual currencies. Some of these cases can provide valuable insights for the defense and investigation of criminal cases related to virtual currencies.

Today, we share a fraud case that evolved from an investment dispute between individuals involving virtual currencies (Case No.: (2019) Jing 0105 Criminal First Instance 2172). Through this case, we will discuss whether the virtual currencies involved can be priced in criminal cases related to virtual currencies.

1. Case Introduction

Between June and July 2018, Zheng deceived Wang under the pretense of helping him invest in blockchain projects at locations such as the China World Hotel in Chaoyang District, Beijing, and defrauded Wang of 32 bitcoins and over 1,000 ethers. Zheng resold the bitcoins he received, making a profit of over 1.64 million yuan. After being notified by the police from the Jian Guo Men Wai Police Station of the Chaoyang Branch of the Beijing Public Security Bureau, Zheng voluntarily surrendered.

After hearing the case, the court determined, based on the statements of the victim Wang, witness testimonies, and documentary evidence, that Zheng had fabricated facts with the intent of illegally possessing others' property, and the amount involved was particularly large, thus he should be held criminally responsible for fraud.

Ultimately, the court sentenced Zheng to ten years in prison and a fine of 200,000 yuan.

2. Beijing Chaoyang District Court: Virtual Currencies Cannot Be Priced in Individual Cases

In recent years, the number of fraud cases involving virtual currencies or fundraising fraud has been increasing. A very critical question in these cases is: how to determine the amount involved.

Lawyer Liu has mentioned in several previous articles the different practices of judicial authorities in this regard, such as using the price at which the victim purchased the virtual currency, the price at which the suspect/defendant sold the stolen goods, the market price from overseas virtual currency exchanges, and the appraisal/evaluation price from domestic third-party institutions, etc.

However, this case from the Chaoyang District of Beijing explicitly states in the judgment document: "The value of virtual currencies is influenced by national laws, regulations, and industry regulatory policies, and it is not appropriate to directly determine it in individual cases." In Lawyer Liu's view, this is simply the most standard adjudication criterion at present. We will analyze the specific reasons below, and the court ultimately used the amount of over 1.64 million yuan obtained from Zheng's sale of stolen goods as the amount involved in the case.

3. Policies and Practices Regarding Virtual Currencies

Why is it said that the judgment document from the Chaoyang District Court is very standard? As early as September 15, 2021, a regulatory policy document on virtual currencies was jointly issued by ten national ministries and commissions, including the "Two Highs and One Department," titled "Notice on Further Preventing and Dealing with Risks of Virtual Currency Trading and Speculation" (also known as the "9.24 Notice"), which uniformly classified activities related to virtual currencies as "illegal financial activities," including providing information intermediary and pricing services for virtual currency trading.

Although in judicial practice, some believe that the judicial authorities themselves or third-party institutions commissioned by them determining the price of the virtual currencies involved is essentially a judicial activity and not the "pricing services for virtual currency trading" prohibited in the "9.24 Notice"; however, some (especially defense lawyers) often believe that the "9.24 Notice" constitutes a "one-size-fits-all" comprehensive prohibition on activities related to virtual currencies, without any exemption or exclusion for judicial activities. The determination of the price of the virtual currencies involved by judicial authorities or their commissioned third-party institutions (such as appraisal institutions, auditing institutions, etc.) is essentially a form of "pricing behavior for the virtual currency transactions involved," which violates the current national regulatory policies on virtual currencies.

To better resolve the issue of determining the value of the virtual currencies involved, Lawyer Liu believes that the approach taken by the Chaoyang District Court in Beijing is commendable: the court, in principle, does not actively determine the value of the virtual currencies involved. Especially in cases where there is a sale amount, the amount involved should be primarily determined by the sale amount. If there is no sale amount, then the purchase price of the virtual currencies involved, the cash disposal amount, and the amounts from judicial appraisal or evaluation should be considered in that order.

In principle, judicial authorities should not actively price the virtual currencies involved, unless it is impossible to determine the amount involved through other means, and the amount involved is indispensable for conviction and sentencing, only then can they actively price the virtual currencies involved.

4. Conclusion

Some lawyer colleagues say, "Nothing makes the law as entangled as virtual currencies," and Lawyer Liu deeply agrees. The reason for this is not complicated; it is actually due to the overly simplistic and superficial understanding of virtual currencies by regulators in our country, who intend to completely control virtual currencies with a simple regulatory document. However, in practice, this not only fails to achieve thorough control but also causes significant confusion for other law enforcement and judicial activities.

The solution to this problem is also simple: amend the "9.24 Notice." As for how to amend it, we can discuss that another time.

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