Written by: Xiao Za Legal Team
On August 5, 2025, the Supreme People's Procuratorate released public information stating that the Sixth Evaluation Group conducted a public prosecution support evaluation activity in Jiao District, Ningde City, Fujian Province, regarding a "cryptocurrency-related" fraud case (the Lin and Wu fraud case). It is noteworthy that the evaluation of this case had a high standard, with members of the Supreme People's Procuratorate Party Group and the Deputy Chief Prosecutor, as well as the Party Secretary and Chief Prosecutor of the Fujian Provincial Procuratorate, handling the case on-site, highlighting the importance attached to it.
Whether this is a coincidence or a deliberate act is unclear to the Xiao Za team, but objectively, there has been a noticeable increase in "cryptocurrency-related" cases evaluated by the Supreme People's Procuratorate this year, and there is a clear trend towards harsher evaluations of the cases…
Today, the Xiao Za team will provide a detailed explanation of this evaluation case and interpret the basic direction of the criminal justice policy regarding "cryptocurrency-related" issues.
01 "Concealment" or "Fraud"? Under what circumstances will the actions of cryptocurrency merchants be elevated in evaluation?
As a professional legal team that has long served the field of cryptocurrency assets, the Xiao Za team often encounters cases related to "black and gray industries," which generally refer to "industrial chains" that profit through illegal means or operate on the fringes of the law, particularly in finance and online sectors.
Currently, due to the fact that cryptocurrency assets (especially stablecoins like USDT and USDC) exist outside the traditional financial regulatory system and have low transaction fees globally, they have become widely used payment and settlement tools in the "black and gray" industry. We have also observed that a large number of cryptocurrency merchants are actively or passively serving (or even specifically serving) the black and gray industry, with a trend of downstream crimes approaching upstream crimes, leading to situations where aiding behaviors are "criminalized."
The fraud case involving Lin and Wu evaluated by the Sixth Evaluation Group of the Supreme People's Procuratorate on August 5, 2025, is a typical example.
(1) Basic Case Facts
According to information released by the Supreme Court, the case is as follows: In October 2024, Lin and Wu joined a group on Telegram (referred to as "Paper Airplane") called "National Door-to-Door U Exchange." In the group, the two helped telecom fraudsters receive cash packages sent by victims or directly connected with victims to collect cash, then delivered the money to the location designated by the fraudsters. After the transaction, Lin would take 2% of the total amount transferred as a reward.
As their business grew, with tasks involving various locations across the country, Lin also recruited more than ten minors to act as "collectors," forming a "Fuan Part-time" chat group and other temporary task groups on "Paper Airplane," assigning tasks, arranging divisions of labor, and providing tools such as mobile phones, headphones, and SIM cards for committing crimes. Wu assisted Lin in distributing tasks, collecting money sent to Fuan, and distributing rewards to the "collectors."
From November 11 to December 5, 2024, the two helped the fraud gang collect a total of 3,354,100 yuan from victims, earning a total of 20,682 yuan.
(2) Case Controversy
The focus of the controversy in this case is whether the two merely helped conceal the criminal proceeds (i.e., only assisted in the flow of funds for the fraud gang) and should be convicted of "concealment of criminal proceeds," or whether they constituted accomplices of the fraud gang (i.e., they participated in the fraudulent activities) and should be held responsible for the fraud committed by the gang.
According to information disclosed by the Supreme People's Procuratorate, the prosecutor asked the suspects two questions in court:
Question 1: "During the investigation, you confessed that before gathering 'collectors' to collect cash, you knew you were helping others collect money that had been defrauded from victims. Is that true?" The suspect replied: "True."
Question 2: "When you arranged for 'collectors' to connect with victims to collect cash, did you also teach the 'collectors' to disguise themselves as customer service personnel to gain the victims' trust?" The suspect replied: "Yes."
Ultimately, the court determined that the suspects had a very clear understanding of the upstream crime being fraud, and that the funds they obtained from victims were proceeds of the upstream crime. They even trained the "collectors" on how to deceive victims. Therefore, the suspects' actions should be classified under "fraud" and evaluated as accomplices.
In simple terms, the "water sellers" became the "doers."
(3) Is it correct to elevate the evaluation of cryptocurrency merchants?
The Xiao Za team believes that whether cryptocurrency merchants are evaluated as "water sellers" or "doers" hinges on the following points:
1. Do cryptocurrency merchants have a sufficiently clear understanding of the nature of the upstream crime, the nature of the exchanged funds, and their intended use?
In practice, the two most common charges against cryptocurrency merchants are "concealment of criminal proceeds" and "money laundering." Different upstream crimes and the nature of the funds often lead to different convictions.
However, whether it is "concealment" or "money laundering," the subjective understanding of the suspects generally only reaches the limit of "the relevant funds are proceeds from upstream criminal activities."
2. Did the cryptocurrency merchants only provide assistance after the upstream crime was completed?
Generally speaking, both "concealment" and "money laundering" are forms of post-crime assistance, and such assistance typically cannot occur during the commission of the crime.
In cases of continuing offenses (where criminal behavior continues over a certain period, forming a continuous process) and serial offenses (where the perpetrator continuously commits several similar criminal acts based on the same or generalized criminal intent within a short period, with fraud being a typical example of a serial offense), the actions of "concealment" or "money laundering" should at least occur after the crime has reached a certain stage of completion (for example, if a fraud gang simultaneously defrauds multiple victims, and only manages to defraud victim A, then for A, the criminal act has already been completed; at this point, if a cryptocurrency merchant intervenes to exchange A's funds, it constitutes "post-crime assistance").
In this case, Lin and Wu effectively undertook the final link in the fraud gang's actions—cash withdrawal. Therefore, when they intervened, the fraudulent act had not yet been completed; rather, it was their deception or training of the "collectors" using scripted dialogues that ultimately led to the success of the fraud.
Based on the above circumstances, the court's conviction and punishment of the two for fraud is legal and compliant.
02 Fraud Bundling with Cryptocurrency Merchants has Become a New Criminal Trend
The Xiao Za team has found in practice that the new criminal method of bundling fraud with cryptocurrency merchants is becoming increasingly common, primarily because fraud gangs are increasingly using cash and cryptocurrency transactions to evade traditional financial system regulations.
According to the Xiao Za team's experience, the current operational process is roughly as follows:
(1) Fraud gangs lure victims into investing, recharging to unlock, cash-back for orders, investment returns, and other schemes;
(2) Once the victim is hooked, the fraud gang informs them that they must open an online cryptocurrency wallet (with actual control in the hands of the fraud gang) according to instructions and complete payment in cash, while also offering door-to-door currency exchange services;
(3) The fraud gang recommends several cryptocurrency merchants' WeChat accounts to the victim;
(4) The victim arranges an offline transaction time and place with the merchant, hands over cash to the merchant, who then transfers a small amount of U to the fraud wallet address for testing; if successful, the fraud gang will inform the victim that the test funds have been received;
(5) Subsequently, the merchant transfers the cash equivalent of the victim's funds entirely into the fraud wallet address, and the fraud gang informs the victim that the investment/unlocking/order/cash-back has been successful, waiting for profits;
(6) Immediately afterward, the victim's cryptocurrency wallet funds are transferred.
The Xiao Za team warns that in the currently frequent occurrences of such crimes, all cryptocurrency merchants are at risk of being elevated to accomplices in fraud, as they essentially participate in and assist the most critical link in the fraudulent act—obtaining the victim's property. This is an extremely dangerous behavior.
Additionally, some bolder cryptocurrency merchants believe that as long as they do not "self-expose" their subjective understanding like the suspects in the reference case, they will not be elevated in treatment. This is not the case; in China's judicial practice, the subjective understanding of suspects actually needs to be comprehensively assessed through objective behavior.
In other words, if the criminal behavior is significantly abnormal and lacks reasonable explanation, it can be very dangerous. For example: (1) using instant communication tools like "Paper Airplane" or "Bat" that can evade regulation and destroy records; (2) using cash transactions to deliberately evade financial regulation, etc.
03 In Conclusion
As mentioned earlier, there are indeed many "cryptocurrency-related" cases evaluated by the Supreme People's Procuratorate, and on April 21, 2025, the Supreme People's Procuratorate attended a hearing in the Sichuan Tianfu New Area Court regarding a "theft of cryptocurrency" case. Regarding the behavior of "theft of cryptocurrency," opinions were given on whether it constitutes "theft" or "illegally obtaining data from computer information systems," addressing this longstanding issue (overall, it appears that such cases are trending towards "theft" in judicial practice).
It is evident that the current judicial practice in our country is increasingly emphasizing "cryptocurrency-related" cases, generally showing a trend of "harsher" penalties. Cryptocurrency merchants and related industry practitioners must pay attention to their own risks and must not continue to tread the line.
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