Author: Shao Shiwei

As the complainant, if you want to file a criminal complaint in mainland China and hold the infringer accountable, the first prerequisite is to determine one thing: whether the infringer is in mainland China. If the infringer is in Hong Kong or overseas, even if the domestic public security bureau files a case, there is a high probability that there will be no follow-up. For the reasons, you can refer to this article "Can Chinese Public Security Arrest People Across Borders for Telecom Network Fraud Committed Abroad?" This article will not elaborate further. This is also why many overseas Web3 projects that scam users are often futile for domestic users to report, as these individuals are usually located overseas.

With this prerequisite in mind, we begin to address the main topic. For the complainant, the first questions they will face are:

What materials need to be submitted for reporting? Which public security bureau should the complaint be filed with? If reporting to the public security bureau, will they determine that we are engaged in illegal business and instead investigate us?

Who is Qualified to File a Complaint as a "Victim Unit"?

For Web3 project parties, if it involves project personnel receiving commercial kickbacks from trading parties, embezzling or misappropriating project funds due to their position, or if project funds are defrauded or stolen, which entity should report as the victim unit? This needs to be discussed based on whether the Web3 project party has established a physical company in China.

Generally, Web3 platform operators often set up the project entity in places like Hong Kong, Singapore, or the Cayman Islands, but at the same time, considering factors like labor costs and ease of communication and management, they will recruit employees domestically.

For larger platforms, such as virtual currency exchanges, it is common to collaborate with domestic third-party companies, where domestic third-party outsourcing companies sign labor contracts with employees and pay social security. However, many Web3 project parties are established by the actual controllers or by third parties instructed by them, employing staff through these companies and paying social security and salaries.

In this case, the appropriate reporting entity becomes the key to whether a case can be filed.

If a Web3 project party registered overseas suffers losses, can a domestic entity be reported as the victim unit?

Referring to traditional criminal cases, if a foreign-funded enterprise is the victim unit and has subsidiaries, branches, or offices in China, then the subsidiary, branch, or office can jointly file a complaint with the foreign-funded enterprise as the victim unit.

Therefore, if a Web3 platform can prove that its company established in China has a certain connection with itself, then the domestic company should be able to jointly act as the victim unit to file a complaint.

However, in many Web3 projects, although the project entity is established overseas, it only establishes labor relations with domestic employees through third-party outsourcing companies. This raises a practical issue: can the cooperating company act as the "victim unit" to file a complaint?

From a legal relationship perspective, third-party outsourcing companies typically do not directly participate in project fund management and do not have the rights to control or benefit from the assets involved, making it difficult for their entity status to be recognized as a victim unit. If they report in their name, they may face the risk of being questioned for lacking direct losses or rights basis.

However, in judicial practice, there are still cases where the cooperating company acts as the reporting entity, with its staff submitting materials on behalf of the project party. This approach can indeed help push the case into the investigation process in certain cases, but it also provides a breakthrough for the defense to argue about whether the "reporting entity and the actual interest entity are consistent."

For Web3 project parties, another key issue they need to face is whether the platform itself can be recognized as a "victim unit" under Chinese law.

Certain Web3 business models, such as on-chain prediction markets, derivative trading, and on-chain token liquidity matching, have clear regulatory positioning in some countries and regions. However, in mainland China, since virtual currency-related businesses are classified as "key areas for prevention and prudent regulation," judicial authorities often consider two aspects when determining whether the platform has "legitimate rights and interests":

• Whether the entity qualifications comply with legal regulations (whether it has the qualifications for compliant operation within the territory);
• Whether the business content falls within areas prohibited or restricted by domestic law.

Therefore, if the core business of the platform falls within the prohibited operational scope in mainland China, its legal basis as a "victim unit" will be restricted, and the corresponding complaint path will become complicated.

However, this does not mean that all Web3 businesses cannot obtain victim status. If the nature of the platform's business does not touch upon clearly prohibited areas in the country and can prove the existence of actual damage facts and asset rights connections, it may still be recognized as a victim unit by judicial authorities.

Will Reporting a Case Reverse Risks for the Web3 Project Party?

This is one of the most concerning issues for project parties when considering criminal complaints.

Given the domestic policies such as the 924 notice, virtual currency-related businesses are classified as illegal financial activities. Therefore, if the project party reports a case, it needs to assess the legality of the project itself; otherwise, it may not only be difficult to be recognized as a "victim unit" under Chinese law, but it may also expose itself to criminal risks.

However, illegal financial activities are not equivalent to criminal offenses, or specific criminal charges; the risk level of the business still needs to be comprehensively assessed based on whether it conducts business targeting users in mainland China and whether it absorbs funds from domestic users.

Because many project parties are uncertain about this, some individuals exploit the project party's concerns about "domestic risks" to extort them under the guise of "exposure," "rights protection," or "reporting."

For example, reports have mentioned that on October 16, 2023, Billy Wen, the founder of Negentropy Capital, stated on the X platform that last year his fund was extorted by a so-called rights protection group after investing in a Web3 project. He subsequently reported the case to the Longgang police in Shenzhen, and the case was filed. The suspect, Wu, allegedly extorted 50,000 USDT (over 300,000 yuan in total). Wu claimed he was incited by a Twitter influencer named BitRun and provided fabricated rights protection materials to carry out the extortion online. The court is expected to hear and rule on the case soon.

This shows that even under a cautious regulatory environment, not all project parties are in a position where they cannot protect their rights. As long as they can clarify their rights basis and conduct a pre-assessment of business legality risks, they may still gain support from judicial authorities.

Which Public Security Bureau to Report To? — Determining Jurisdiction

Which public security bureau should be reported to, and which bureau has jurisdiction over the case? For the reporter, if this question is not determined beforehand and they report recklessly, it may lead to:

• The public security bureau refusing to accept the case on the grounds of "lack of jurisdiction"
• Different regional public security bureaus transferring and shirking responsibility
• Even if a case is filed, the defense may later raise objections based on "improper jurisdiction," affecting the case's direction

Therefore, clarifying jurisdiction is the first step in determining whether the path to protect rights is feasible.

In China's criminal cases, the principle of territorial jurisdiction is based on the location of the crime, with the defendant's residence as an exception. However, there are also jurisdictional provisions for special circumstances, such as cybercrime.

According to the basic provisions of territorial jurisdiction, if a Web3 project party files a criminal complaint, the crime must at least occur within the territory of China. So how do we understand the location of the crime? In Web3 scenarios involving on-chain assets, permission management, and cross-regional personnel collaboration, the crime location is not limited to offline locations but includes any of the following places:

• The location where project funds or digital assets are transferred or controlled
• The location where private keys or account permissions are operated
• The location where asset losses ultimately manifest
• The location where criminal proceeds are obtained, concealed, or used

In other words, operations on the chain will ultimately land at a certain node in the real world, whether it be people, devices, or the flow of funds; these "landing points" themselves constitute the scope of territorial jurisdiction that domestic justice may touch upon.

For criminal charges such as theft or fraud, complaints are generally filed with the public security criminal investigation department at the location where the theft or fraud occurred, or where the funds (currency) were transferred or received.

For criminal charges such as bribery of non-state staff, embezzlement, or misappropriation of funds, if the Web3 project party has a branch in China, it can report to the public security economic investigation department at the branch's location. However, for Web3 project parties without branches in China, they can choose to report to the economic investigation department at the actual crime location or the suspect's residence.

Do Foreign Evidence and On-Chain Evidence Need Notarization?

The business operations, account systems, asset management, and communication collaboration of Web3 projects often occur on overseas servers, on-chain systems, or cross-border communication tools. Therefore, when filing a criminal complaint, there is often a practical issue:

Can this evidence be directly used in China? Must it be notarized?

According to the Criminal Procedure Law, if a Web3 project party collects relevant materials regarding the facts involved in the complaint, including the authorization procedures for relevant agents (such as employees, lawyers, etc.), notarization is required. If it involves foreign languages, a Chinese translation should also be attached.

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