Source: Procuratorate Daily
"Virtual currency often brings not benefits but legal risks! Using virtual currency to provide cross-border exchange and payment services to earn exchange rate differences and realize the value conversion of foreign exchange and RMB is a disguised foreign exchange purchase and sale, which constitutes the crime of illegal business operation. In recent years, new crimes using virtual currency as a medium may also involve fraud, money laundering, illegal fund-raising, etc. Everyone should remain rational and do not participate." On November 18, the Jianhu County Procuratorate of Jiangsu Province, in conjunction with a new type of criminal case using virtual currency transactions as a medium, organized police officers to provide legal consulting services in communities, streets, banks and other places, publicize the main forms of virtual currency crimes to the public, interpret the legal risks of virtual currency transactions, guide the public to establish correct investment concepts, and jointly create a good atmosphere for resisting virtual currency transactions, so as to curb virtual currency crimes at the source.
On November 18, the police officers of Jianhu County Procuratorate went deep into the communities and streets to distribute brochures, explain the main forms of virtual currency-related crimes, and interpret the legal risks of virtual currency transactions.
In this case, three "post-95" guys used virtual currency transactions as a medium to engage in the "business" of buying and selling foreign exchange. In just a few months, they completed more than 650 transactions and exchanged nearly 30 million yuan in foreign exchange. After the prosecution of Jianhu County Procuratorate, Lin and three others were sentenced to fixed-term imprisonment of five years to one year and six months for the crime of illegal business operations, and each was fined.
In early 2020, 25-year-old Lin had not found a suitable job due to his low level of education. At that time, the virtual currency market was booming. He learned on the Internet that many people became rich overnight by speculating in cryptocurrencies, so he also wanted to use virtual currency to make a comeback. After being introduced by a friend, he and his high school classmate Yan started to "move bricks" with virtual currency in a local studio.
The so-called virtual currency "moving bricks" is actually a virtual currency trading model. They buy and sell virtual currencies on two different exchange platforms, Binance and Huobi, and buy low and sell high to earn the difference. At that time, Lin was only engaged in simple virtual currency "moving bricks" until August 10, 2020, when Lin accidentally met a Nigerian nicknamed "Prince" in a transaction. After the two parties added WeChat, the "Prince" said that it was expensive to buy and sell foreign exchange in banks or foreign exchange companies, and wanted to exchange the local legal currency Naira into RMB through Lin.
How can we circumvent foreign exchange regulation and convert Naira into RMB? Lin quickly thought of a perfect solution: "Prince" bought Tether on Binance Exchange with the country's legal currency Naira, and then transferred it to Lin's Binance Exchange account. Lin sold Tether to domestic currency dealers in exchange for RMB, and then transferred it to the bank account in China provided by "Prince". Lin determined the purchase price in advance based on the listing price of Tether that day, which was 5% lower, and then sold it to domestic currency dealers at the listing price to earn the difference. The whole process only requires simple operation and communication, and there is no need to advance funds, so you can "make money out of nothing". The first transaction was completed in half an hour, earning 300 yuan, which made Lin taste the sweetness and determined that this was a way to make a fortune.
In September 2020, Lin and Yan decided to resign and go out on their own. They bought a work phone and registered a work WeChat account, which was specifically used to contact Nigerian customers, domestic currency dealers and conduct virtual currency transactions. In January 2021, Lin and Yan's bank accounts were restricted from trading due to frequent large inflows of funds, so they asked their classmate Xie to join and asked Xie to provide a bank card to receive funds.
"I had a formal job at the time, but my income was not high and I was often short of money. I heard them say that doing this would make money quickly and that I had free time and could complete it in my spare time, so I agreed. I didn't expect this to be a crime." After the incident, Xie regretted it.
Soon, Xie learned the basic operations from Lin, and the three began to take turns to operate, one person was responsible for a week, and they operated for less than two hours a day. They made this foreign exchange "business" "flourishing".
On June 17, 2022, the three were arrested by public security police at their respective homes.
In October 2022, the Jianhu County Procuratorate intervened in accordance with the law, coordinated with the public security organs to discuss and determine the nature of the case, actively guided the tracking of cross-border capital chains, and urged the public security organs to promptly obtain evidence such as recharge and withdrawal transaction records of overseas virtual currency trading platforms, WeChat chat records of criminal suspects, and bank account transaction details.
The investigation found that from September 2020 to January 2021, Lin and Yan bought and sold foreign exchange for more than 21.29 million yuan in disguised form. From January to April 2021, after Xie joined, the three bought and sold foreign exchange for more than 8.38 million yuan in disguised form. "The disguised buying and selling of foreign exchange seems that there is no physical flow between the RMB and foreign exchange, but in fact it circumvents my country's foreign exchange supervision, affects the stability of my country's financial market, and at the same time causes the inaccuracy of economic data held by the state, affecting financial decisions such as exchange rate and foreign exchange reserve adjustment, which is extremely harmful." The prosecutor handling the case told reporters.
On January 26, 2024, the case was transferred to the procuratorate for review and prosecution. "I didn't know that Tether came from Nigeria. I was just doing ordinary virtual currency 'moving bricks' to earn the price difference. It is a legal arbitrage behavior and does not constitute a crime." Lin said in the interrogation room.
Faced with Lin's sophistry, the prosecutors in charge of the case compared domestic and foreign transaction records, extracted the content related to foreign exchange exchange in the chat records, and the testimony of the domestic recipients related to the exchange records, and found out the conversion process of the funds involved, the amount of the crime, and the suspect's understanding of the source and nature of virtual currency one by one. In the face of a strict chain of evidence, Lin finally admitted that he knew that Tether was used by Nigerians to pay domestic recipients for goods, and pleaded guilty. Later, Lin and the other three withdrew all the proceeds of the crime.
The prosecutor reviewed and believed that Lin and the other three used virtual currency as a medium to provide cross-border exchange and payment services to earn exchange rate differences. They used the special attributes of virtual currency to circumvent the state's foreign exchange supervision, affecting the effectiveness of foreign exchange management and the stability of legal exchange rates, disrupting the normal financial market order, and should be held criminally responsible for illegal business operations in accordance with the law.
On February 26, the Jianhu County Procuratorate filed a public prosecution against Lin and three others for suspected illegal business operations, and proposed sentencing recommendations based on the criminal facts and circumstances of the three. On April 29, the court adopted the procuratorate's conviction and sentencing recommendations after trial, and sentenced Lin and Yan to five years in prison, each with a fine; and sentenced Xie to one year and six months in prison, suspended sentence, and a fine. None of the three appealed, and the verdict has come into effect.
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