Author: Lawyer Shao Shiwei

For families involved in criminal cases, the sudden investigation of a family member for cryptocurrency fraud often leaves them at a loss.

On the one hand, the case itself involves professional content such as virtual currency, platform trading, and order placement, which is difficult to understand at a glance;

On the other hand, the feedback from the outside world is often quite simple – “This is basically a scam.”

However, in actual handling of such cases, it is found that this is not a simple act by a single individual, but often a chain with a clear organization and division of labor:

There is a platform manager who is responsible for the overall setup and financial operations;

There are technical personnel responsible for system development and maintenance;

There are business personnel responsible for external promotion and developing agents;

There is an agent team responsible for attracting people and converting customers;

There are also lecturers and trading instructors who guide transactions in live streams or online communities.

From the outside, these roles all appear to be operating around the same platform.

However, when it comes to specific individuals, the specific steps they take, the information they possess, and their understanding of the overall model are often completely different.

For this reason, not everyone is evaluated in the same way in specific cases, and they cannot all be simply treated as fraudsters.

However, those involved often only see their own part of the work, lacking an understanding of the overall structure and the ability to judge how their actions will be legally evaluated, making it even more difficult to come up with targeted defense strategies in the first instance.

It is precisely under such circumstances that many cases may appear to have been determined on the surface, but when it comes to individual cases, there is still room for negotiation to varying degrees—including the possibility of acquittal, a minor offense, or even no crime at all.

Based on Attorney Shao's past experience handling similar cases, the following are some judgment approaches from several key dimensions for the reference of families who have encountered cryptocurrency fraud cases.

1. Five key issues that determine the course of the case

Based on experience in handling cases, whether such cases are classified as fraud often depends on a comprehensive judgment of several core issues.

1. Has the user been deceived by the platform?

To determine the nature of such cases, we must first go back to the starting point—was the user's (investor's) investment behavior caused by being deceived by the platform, agents, or other involved personnel?

In practice, we usually judge an investor's true state of understanding from the following aspects:

Investment duration. If an investor has been involved in trading for one or two years, or even longer, they usually have a considerable understanding of the platform's operating model, fund flow, and risk characteristics. It's hard to say that they have been "scammed" for such a long time.

Does the platform have a history of profits? If an investor has never made a profit, or is unable to withdraw profits afterward, the signs of being scammed are more obvious. However, if an investor has made profits and successfully withdrawn them, it indicates that the platform is not a "one-way street" platform. The investor's subsequent losses may be the result of continued trading, rather than being scammed by the platform.

Whether they can make independent decisions. In many cases, we can see investors mentioning in their statements: "Sometimes I don't listen to the advice of the trading advisor. If he suggests I buy long, I buy short." This shows that investors are not mechanically following the advisor's instructions, but have the awareness and ability to make independent judgments.

If many people have been doing this for one or two years, and even made a profit, but only realize they've been "scammed" after ultimately losing money, this is a situation that defense lawyers need to emphasize to investigators in judicial practice.

For example, in a case previously handled by Attorney Shao involving a digital collectibles platform accused of fraud, we emphasized a key question during our communication with the procuratorate: Did users participate in the transactions under duress, or did they choose to continue investing after understanding the rules? Around this point, we further introduced the analytical perspective of "investor cognitive state." It was precisely at this level that the investigators re-examined the transaction model in this case:

—Was it deception of the user, or did the user voluntarily participate in the transaction despite knowing the risks involved?

Ultimately, the case was not classified as a fraud crime (➡️Related Reading: Successful Case of Acquittal in Fraud Case | From Facing More Than Ten Years in Prison to Acquittal! ).

2. Is the data on the platform real or fake?

A crucial question in these types of cases is whether the platform's data is genuine or fabricated.

In some cases, technical staff will clearly state that the platform's candlestick chart is generated from real-time market data of a certain exchange, and is not generated by the platform itself.

If this can be proven, then investors' profits and losses stem more from market fluctuations themselves than from the platform "manipulating wins and losses" in the background, leading to a significantly different case evaluation. In terms of evidence, this requires examining: Can it be proven that the data is accessed in real time? Is there a function to modify the data in the background? Even if such a function exists, is there evidence to prove that it was actually used to manipulate trading results?

This is a very important dividing line in terms of qualitative analysis.

Conversely, if it can be proven that the data was generated in the background or that profits and losses could be manipulated, the nature of the case would fundamentally change.

3. How exactly did the losses occur?

Many family members might wonder, since users have suffered losses and have reported the case to the police, does that mean the platform is indeed manipulating the market, profiting from customer losses, or even operating a Ponzi scheme?

However, in specific cases, we often need to further investigate how the loss actually occurred.

for example:

• Does high-frequency trading (frequent buying and selling) exist?

• Did you use high leverage (borrow money to trade cryptocurrencies)?

• Do you frequently enter and exit the market, or chase highs and sell lows?

These factors themselves can significantly amplify losses. Even without platform manipulation, long-term, high-frequency trading greatly increases the probability of losses compared to profits.

Even in the case files, we will see the victim's statement: Sometimes I listen to the teacher, sometimes I don't, and sometimes I even do the opposite - then it is hard to say that the loss was entirely caused by one party's "control".

This also shows that there may be many reasons why users lose money, and it cannot be simply equated with being scammed by the platform.

4. What is the composition of the income of the individuals involved in the case?

How the individuals involved profited is also a very important question.

In practice, we often need to distinguish where their income actually comes from.

For example, if a platform's revenue mainly comes from transaction fees and spreads (the difference between the buy and sell prices), this is a common way for trading platforms to make money, and its nature is closer to providing trading services.

However, if the platform's main revenue comes from a share of customer losses (i.e., "customer losses"), or even directly withholds customer principal, then its profit model has changed, and it is more likely to be perceived as a fraud in reviews.

For example, the role of a "lecturer" can usually be understood as providing information or training services if their income is limited to fixed hourly fees, course fees, or membership fees. However, if their income is directly linked to customer losses, such as taking a percentage of the losses, or even participating in the distribution of "customer losses" after "reverse trading," then the role of their behavior in the overall chain will be re-evaluated, and the corresponding legal risks will also increase significantly.

For example, a certain exchange previously exposed online was offering "customer loss sharing" to its agents. The "profit sharing" mentioned refers to customer loss sharing (the amount of customer losses is split between the platform and the agent at a 37 ratio). The more users lose, the higher the agent's share.

(Image source: Internet)

5. Can users withdraw their money normally?

This is an easily overlooked point of defense: whether investors can withdraw their money normally on the platform.

For example, in the aforementioned chat log, the agent asked whether the agent should bear the loss if the client won money (while the platform lost money). The agent suggested that the platform "directly block withdrawals," that is, restrict users from withdrawing their funds.

However, in some cases:

• Investors can deposit and withdraw funds freely.

• Some people have even made money and successfully withdrawn it.

• Even if the platform changes its version, the funds can be transferred accordingly.

In this situation, the platform does not substantially restrict the outflow of funds, and investors still retain some control over their funds. Because of this, determining whether there is an "intent to illegally possess" becomes highly controversial. It is difficult to directly conclude that the platform's purpose was to possess user funds.

It is precisely because of this that in practice, situations arise where surface patterns are similar, but the processing results are significantly different.

2. In similar cases, how do courts make their judgments?

In one cryptocurrency-related case I handled, although the prosecution accused the platform and related personnel of fraud, the court ultimately did not convict them.

Judging from the reasoning behind the judgment, the core focus is not on the superficial aspects such as "trading with orders" and "losses," but rather on several key facts:

• The existing evidence is insufficient to prove that the platform data is false.

• It cannot be proven that the defendant could manipulate real-time transaction results.

• The platform does not restrict withdrawals, allowing users to freely deposit and withdraw funds, and some victims have testified that they profited through trading on the platform.

In cases where these facts cannot be verified, the key elements of the crime of fraud—"fabricating facts and concealing the truth" and "intent to illegally possess"—are difficult to establish.

Of course, each case is different, and specific conclusions cannot be simply applied.

However, this type of judicial approach at least shows that the characterization of virtual currency transaction cases is not just about looking at the surface pattern, but about returning to the evidence itself.

In specific cases, as long as there is uncertainty about the key facts, there is often still room for defense.

3. Conclusion

In practice, the characterization of such cases is often not a simple question of "constituted a crime" or "not constituted a crime," but rather depends on a comprehensive judgment of the specific circumstances.

Differences between different roles often directly affect evaluation results. For example, platform operators, technical personnel, business personnel, agents, lecturers, salespersons, and even investors themselves may have significant differences in specific communication content, fund flows, participation methods, and their level of understanding of the overall model.

If these individual differences are not communicated to the investigators in a timely manner and fully explained, they are often treated as a single entity, which can lead to a more unfavorable outcome in the characterization of the case.

Therefore, if you encounter a similar situation at home, it is more important not to dwell on whether it is a scam, but to sort out the key facts as soon as possible—including what exactly was done, how you participated, how the funds were transferred, and whether you understand the overall model.

If these issues are not clarified in the early stages of many cases, it will often become very passive to try to adjust the direction later, and even miss more favorable opportunities for handling the case.

Special Note: This article is an original work by Attorney Shao Shiwei and represents only the author's personal views. It does not constitute legal advice or opinions on any specific matter.