Analysis of the Conviction Paths of Judicial Authorities in Cases Involving Virtual Money

I. Overview

Recently, through the study of a large number of criminal cases involving virtual money, we can summarize some common practices and conviction standards of the judicial authorities when handling such cases. This article will explore how to determine whether certain actions constitute a crime in some common coin-related offenses.

2. Typical Cases

In April 2020, the Zhejiang Provincial High Court made a final ruling on a fundraising fraud case involving Virtual Money. The case involved various business models such as coin issuance, promotion, marketing, and ICO.

The special aspect of the case is that the main perpetrator, Xia XX, and others were initially convicted of organizing and leading pyramid scheme activities and were granted probation. However, in December 2019, the Hangzhou Intermediate People's Court revoked the previous judgment, re-convicted Xia XX of fundraising fraud, and sentenced him to life imprisonment. The Zhejiang Provincial High Court upheld this judgment. This significant shift in judgment has sparked reflection on the conviction logic of common crimes in the coin industry.

3. Main Types of Coin-related Crimes and Conviction Logic

(1) The Legality of Virtual Money Transactions

Since the announcement by seven ministries and commissions of the state in September 2017 to prevent the risks of token issuance financing, conducting token issuance within China has been regarded as an unapproved illegal public financing activity, suspected of illegal fundraising and other criminal activities. Even virtual money issued by overseas platforms is considered to have potential risks due to the lack of national recognition and actual economic value.

(2) Common Cryptocurrency-related Crimes

1. Fraud-related crimes (including fraud, contract fraud, fundraising fraud)
2. Pyramid Scheme Crime
3. Establishing a Casino Crime
4. Illegal Business Operations Crime

(3) The Conviction Logic of Crimes Involving Coins

Taking pyramid scheme crimes and fundraising fraud as examples:

1. The elements of pyramid scheme crimes:

   • Set participation threshold
   • Use the number of developers as the basis for calculating rewards.
   • Pyramid schemes must reach three or more levels and have more than thirty people.
   • The perpetrator's goal is to defraud participants of their property.

2. Fraud-related crimes:

   • The perpetrator deceives the victim into forming a false impression.
   • The victim disposes of their own or another person's property based on a misunderstanding.
   • Cause harm to property rights holders
   • The actor obtains the property of others

In virtual money cases, if the platform issues worthless air coins and uses them to exchange participants' mainstream coins, it is likely to be considered fraudulent behavior.

IV. Conclusion

Although investing in Virtual Money has not been explicitly prohibited, related activities may still be regarded as "suspected of undermining financial order and jeopardizing financial security". It is worth noting that the understanding and enforcement of related regulations by law enforcement and judicial authorities may vary across different regions, which is particularly evident in cases involving Virtual Money. Therefore, it is essential to exercise extra caution when participating in Virtual Money-related activities and to fully recognize the potential legal risks.