Discussing the Current Situation and Dilemmas of Criminal Cases Involving Cryptocurrency

Written by: Wei Fuhai, Mankun

Introduction

In a vast forest, there are all kinds of birds— the world of cryptocurrency is no exception. In the days when Bitcoin was worthless and stablecoins had yet to emerge, this circle was merely a small-scale self-entertainment. But everything changed as Bitcoin rose from "10,000 coins for two pizzas" to "one coin for ten thousand pizzas." Especially with the advent of stablecoins, they gradually became favored money laundering tools in the black and gray markets due to their characteristics.

Having engaged in criminal defense for many years, I have encountered numerous cryptocurrency cases. A prominent feeling is that there seem to be particularly many "unlucky" people in this field: some who clearly should not be convicted are found guilty, while others who are evidently suspected of crimes find it difficult to file a case.

Perhaps one’s position affects judgment; some cases that I find problematic may be viewed as "not a big deal" or even "handled appropriately" by the police, the prosecutor's office, or the court.

The two cases I am currently handling are closely related to this theme and are quite representative. Through this article, I would like to share my insights on the current situation and dilemmas of criminal cases involving cryptocurrency based on practical experience.

Reproduction of Real Case Details

Case One

A company from Country H planned to list its token on an exchange located in Country S and connected with a Chinese salesperson from that exchange. Both parties successfully agreed on service fees and the token listing timeline, with the understanding that the company from Country H would pay 800,000 USDT as a service fee before the exchange would initiate the listing process.

After the agreement was finalized, the Chinese salesperson provided a wallet address to the company from Country H, requesting the transfer of 800,000 USDT. After the company complied, the salesperson immediately exited all related group chats and completely went offline. Upon noticing something was amiss, the company from Country H contacted the exchange in Country S, which replied that the employee had resigned the day after the transfer and that the exchange had not received the service fee. At this point, the company from Country H confirmed it had been scammed.

Case Two

A woman met someone online who claimed to be able to help her invest. The person informed her that the investment platform did not accept RMB and only supported USDT transactions. Since the woman did not have USDT, the person recommended a currency exchange service.

Subsequently, she contacted the currency exchange service via WeChat and transferred over three million yuan to multiple bank accounts as requested. However, after the transfer was completed, she did not receive the corresponding USDT, and her investment platform account showed no funds. When she attempted to contact the person who had initially recommended the investment, that person had gone offline. It was then that she realized she had been scammed.

Lawyer's Perspective: Ways to Protect Client Rights

Case One: Obstacles in Cross-Border Reporting and Legal Basis Negotiation

In Case One, the party involved (the company from Country H) initially went to the local police station in the area where the Chinese salesperson was registered to report the case, but the police neither issued a receipt for the report nor provided a notice of refusal to file a case, preventing the party from initiating subsequent relief procedures.

After accepting the commission, our lawyers began preparing legal documents and evidence materials that met domestic reporting requirements. Due to the cross-border nature of the case, the preparation took about two to three months.

Subsequently, we went to the local police station of the suspect to formally report the case. The auxiliary police initially refused to accept the report on the grounds that "the victim company is not in the country." We countered this by citing the provisions on territorial jurisdiction and personal jurisdiction in the "Criminal Procedure Law." The police then claimed that "cryptocurrency is not protected by law," to which we further pointed out that according to the "9.24 Notice," while exchange operations are prohibited, personal possession of virtual assets is not illegal, and judicial practice generally recognizes that virtual currencies have property attributes.

Despite our repeated arguments, the police still refused to issue a written receipt. After we insisted, the auxiliary police finally contacted the on-duty police officer to come to the scene. After multiple rounds of negotiations and our continuous efforts, the case has now been accepted by the police station, but it has not yet been formally filed, and we are still pushing for progress.

Case Two: Recovery Dilemmas After Criminal Filing and Attempts at Civil Remedies

In Case Two, the party involved (the scammed woman) successfully reported the case, and the police quickly filed it and began an investigation, successfully capturing the currency exchange service provider. However, the main suspect in the fraud had an IP address located abroad, making it impossible to apprehend them.

After interrogation and investigation, the police confirmed that the currency exchange service provider was merely engaged in USDT exchange services and had no intent to collude with the upstream fraud gang, leading to the termination of the investigation against them.

To help the party recover her losses, we attempted to pursue civil litigation against the currency exchange service provider on the grounds of "unjust enrichment," requesting the return of the corresponding funds.

Case Review: Issues in Civil Rights Protection

In Case One, the situation could not be resolved through civil litigation.

The main reason is that when the same facts involve both criminal and civil cases, the "criminal priority" principle should be followed. Civil procedures can only be initiated after the criminal case has been concluded. Additionally, if a criminal judgment has already addressed the victim's property rights—such as stating in the judgment that "the victim will continue to be compensated"—the victim cannot file a civil lawsuit on the same facts, as this would violate the basic principle of "non bis in idem" in civil litigation.

So, if a party gives up reporting due to the lengthy criminal case cycle and directly files a civil lawsuit in court, is that feasible?

Theoretically, it is possible to file a lawsuit, but if the court finds it involves a suspected crime upon review, it will rule to transfer the case to the public security agency. In this case, the procedure will revert to the criminal route, which would take additional months.

If the suspect is ultimately convicted but unable to compensate, how should the victim protect their rights?

At this point, one can only hope that the suspect is willing to exchange compensation for a chance at a reduced sentence. According to relevant regulations, criminals who have not fulfilled their obligations for restitution or fines typically cannot have their sentences reduced or be granted parole and must serve the full original sentence.

In Case Two, although we did attempt to file a civil lawsuit against the currency exchange service provider and researched numerous similar cases, the results showed that only two judgments supported the plaintiff's claims, while the rest ended in the plaintiff's defeat. Why is that?

At the case filing stage, the judge in the filing court clearly stated that they could not accept the case and bluntly said that even if they reluctantly accepted it, they would ultimately not support our claims. As a result, the civil case was not accepted.

Conclusion

After cryptocurrency is stolen or scammed, can effective relief be achieved through civil means?

This article initially planned to explore this topic, but after delving into practical matters, it became clear that once a case involves criminal activity, the path to civil relief is actually extremely difficult, if not entirely blocked.

Perhaps some readers may question why many articles on the market have detailed explanations on how to protect rights through civil litigation, including evidence preparation, filing processes, etc., and why it seems "impossible" in this article?

As we personally experienced in Case Two, the judge in the filing court explicitly stated: even if the case were accepted, the chances of winning would be extremely slim.

As lawyers, our responsibility is not only to initiate procedures but also to assess risks for our clients and choose paths that genuinely have the potential to recover losses. Therefore, in cases of cryptocurrency theft or fraud, pursuing recovery through criminal channels remains the more realistic choice at present.

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