Introduction

Recently, according to reports from multiple media outlets, the Philippine Securities and Exchange Commission named the world's largest cryptocurrency exchange, Binance, on November 28 for operating without registration and without obtaining a license to sell securities in the Philippines. As a result, it issued a ban prohibiting Binance from operating locally, requiring Binance to exit the Philippine market within three months, and requiring Filipino investors holding assets on Binance to withdraw. It was reported that the Philippine SEC stated that individuals involved in promoting Binance may also face criminal liability.

Many inquirers have asked me: Lawyer Shao, I am promoting a project in the cryptocurrency industry (such as blockchain games, virtual currency exchanges, ICOs, etc.), which are prohibited in my country, but the projects are operated by teams based overseas. Do I have legal risks in doing so?

Therefore, today, I will discuss the potential legal risks and responsibilities for individuals involved in promoting projects related to virtual currencies.

01Why do promoters face legal risks?

We will use the recent ban on Binance exchange in the Philippines as an example to explain.

According to reports, the Philippine SEC has requested Google and Meta to prohibit online advertisements for Binance exchange to Filipino social media users. The Philippine SEC also requested the National Telecommunications Commission and the Department of Information and Communications Technology to assist in blocking access to the Binance platform in the country.

This indicates that the Philippines will implement comprehensive technical measures to block the Binance exchange, including blocking the exchange's IP and prohibiting local residents from accessing the website.

In addition, the Philippine SEC also stated that individuals in the Philippines who act as promoters, brokers, traders, agents, representatives, endorsers, recruiters, internet celebrities, or advocates, and who sell or persuade people to invest in the platform, even through the internet, may face criminal liability.

This means that any entity involved in promoting Binance exchange, encouraging domestic individuals to register and use the platform, may face criminal risks.

Regarding the above points, similar regulations exist in our country. In the September 24, 2021 notice, virtual currency-related business activities were classified as illegal financial activities, and it was stipulated that:

Overseas virtual currency exchanges providing services to residents within our country through the internet also constitute illegal financial activities. For domestic personnel of these overseas virtual currency exchanges, as well as legal persons, non-legal persons, and individuals who knowingly or should have known that they are engaged in virtual currency-related business, and still provide marketing, promotion, payment settlement, technical support, and other services, they shall be held accountable according to the law.

Therefore, we can see that the legal regulations and policies of any sovereign country have commonalities.

This answers why individuals involved in promoting exchanges and other virtual currency-related institutions/projects may face legal risks. So, what legal responsibilities may individuals such as KOLs, promoters, and agents face?

02Criminal Liability

Let's analyze the frequent inquiries mentioned at the beginning of this article.

In promoting a project in the cryptocurrency industry, although these projects are prohibited in my country, the teams behind the projects are based overseas. Do promoters face legal risks?

Inquirers who ask such questions indicate that they have a certain understanding of our country's policies regarding virtual currency. They are not completely uninformed. They at least know that our country holds a negative attitude towards virtual currency and related businesses.

Therefore, seeing that the projects are based overseas, they may think that since exchanges, blockchain games, and ICOs are allowed in the overseas location, and the projects are operational there, there may be little risk in promoting them. (Every time I am asked this question, I find it quite interesting: It is actually a contradictory mindset. If they think there is no risk, why consult a criminal lawyer? Perhaps they still feel apprehensive because they are involved for the commission, and receiving money makes them feel uneasy?)

So, can projects based overseas be promoted in our country?

This can be further divided into two scenarios: promoting on domestic social media platforms (such as Weibo, Douyin, WeChat), and promoting on foreign social media platforms (such as Twitter, TikTok, Telegram).

Promoting on domestic platforms is likely to be obviously not permissible, as most people can sense based on common sense.

But what about promoting on foreign platforms for overseas projects? The answer is still negative.

According to the jurisdictional provisions of our country's Criminal Law, there are territorial jurisdiction and personal jurisdiction. Territorial jurisdiction means that as long as the criminal act or result occurs within our country's territory, our country has jurisdiction; personal jurisdiction means that as long as a Chinese national commits a crime outside our country's territory, our country also has jurisdiction.

This means that even though the project is based overseas, it is difficult for promoters to evade their own criminal risks if the victims (i.e., the group that ultimately suffers losses from the projects introduced by promoters) are in our country, even if the promoters are promoting on overseas platforms. In some judicial cases, it has been determined that the use of chat tools that require circumvention, have "disappearing after reading," and have encrypted calls can be presumed to be knowingly engaging in illegal activities.

Therefore, promoters cannot evade criminal risks based on whether the promotional platform is domestic or foreign. In fact, there have been cases where individuals promoting platforms such as virtual currency exchanges through contracts were detained in criminal cases.

03Civil Liability

Apart from the critical criminal risks, civil risks should not be underestimated. For example:

In late November 2023, several foreign media outlets reported that football star Cristiano Ronaldo (Cristiano Ronaldo) faced a collective lawsuit of at least $1 billion (approximately 7.1 billion RMB) for promoting virtual currency. Several virtual asset investors (plaintiffs) filed a lawsuit in a Florida court in the United States, claiming that Ronaldo "helped Binance successfully attract or attempted to attract cryptocurrency investors" and "led them to make expensive and unsafe investments." (Background: Before the 2022 World Cup, Binance launched Ronaldo's first "CR7" series NFT. These NFTs were priced from $10,000 to $770,000, but their value dropped to $1 a year later.)

In addition to Ronaldo, many other public figures have also faced lawsuits related to promoting virtual currencies, including Larry David and Tom Brady, who were named as defendants in a collective lawsuit against FTX (the world's second-largest cryptocurrency platform before it collapsed in November 2022), and reality TV star Kim Kardashian, who was accused of illegally promoting crypto securities and was investigated by the U.S. Securities and Exchange Commission (SEC).

Celebrities, internet celebrities, and KOLs have significant influence and their actions and statements are widely accepted and trusted by most people on public platforms or social media. According to Article 56 of China's Advertising Law: If a false advertisement for goods or services related to consumer life and health causes consumer harm, the advertiser, publisher, and endorser shall bear joint liability with the advertiser. For false advertisements for goods or services not covered in the previous clause that cause consumer harm, the advertiser, publisher, endorser, who knowingly or should have known that the advertisement is false, and still design, produce, act as an agent, publish, recommend, or endorse it, shall bear joint liability with the advertiser.

Therefore, if public figures, KOLs, and similar groups knowingly or should have known about problems with cryptocurrency projects but still promoted them, according to the law, they should bear joint liability with the project parties.

04Conclusion

In conclusion, whether promoters will ultimately bear responsibility for promoting cryptocurrency projects cannot be completely avoided by fulfilling their duty of care. The biggest risk in promoting cryptocurrency projects lies in the projects themselves.

As individuals unrelated to the projects being promoted, they have no knowledge of how the projects operate, how they generate profits, whether they will have long-term development in the future, and what potential business risks they may have, or whether the project parties will manipulate the market or abscond with funds.

However, due to the platform's "recommendation commission" mechanism, by promoting the projects and receiving commissions, from a legal perspective, they have achieved "shared benefits" (even though the benefits received by promoters are not on the same level as those of the project parties), and therefore, "shared risks." Especially in criminal cases, since the project parties are based overseas and our country's judicial authorities may not be able to "extradite" them, but there are plenty of promoters and agents within our country, the daunting task of compensating the victims falls on these agents/promoters.

Earning money with the mindset of selling drugs but making money like selling vegetables, such money is not worth earning.

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