Lawyer Liu (web3_lawyer) shared a practical case today, using a court judgment (the first instance case number was (2021) Ji 0781 Criminal First Instance No. 105, and the second instance was heard by the Songyuan Intermediate People's Court of Jilin Province) to analyze whether defrauding others of virtual currency constitutes fraud in my country's current judicial practice.

I. Brief Introduction of the Case

In December 2018, Wen (the suspect) and Gao (the victim) met. Wen helped Gao to buy and sell virtual currency ETH on the OKEX platform (now the Euro-Italian Exchange) for arbitrage, promising to return the principal and interest within one month. Gao saw that it was a sure win, so he spent 100,000 yuan to buy 157 ETH on OKEX and transferred it to Wen. However, Wen lost all the ETH in a series of operations, and was ultimately unable to return Gao's principal, let alone interest.

In addition, Wen had another behavior: Wen claimed that he could trade cryptocurrencies and help Xiao (the victim) make money during a chat, thus gaining Xiao's trust. Xiao transferred 220 ETH from his virtual currency account to Wen, and also purchased an additional 40 ETH to transfer to Wen, for a total of 260 ETH, worth more than RMB 175,000 at the time. Wen lost contact after receiving the 260 ETH, and Xiao reported the case.

After the public security organs filed a case for investigation, the procuratorate brought public prosecution. After trial, the first instance court found that the defendant Wen had committed the crime of fraud and sentenced him to four years in prison and a fine of 30,000 yuan. At the same time, Wen's criminal proceeds were recovered and returned to the victim.

Wen was dissatisfied with the verdict after the first trial and filed an appeal, but the Songyuan City Court of Jilin Province rejected the appeal and upheld the original verdict.

2. Legal Analysis

Regarding the crime of fraud, the provisions of my country's Criminal Law are very simple: the act of defrauding public or private property in a large amount.

However, in criminal law theory and practice, we generally examine it from the following four levels:

First, the perpetrator must have the subjective purpose of illegal possession;

Second, the perpetrator fabricates facts or conceals the truth to make the victim fall into a wrong understanding;

Third, the victim disposed of his own property based on a mistaken understanding;

Fourth, the victim loses property, and the perpetrator or a third party obtains property illegally.

Based on the above four points, we analyze the case in this article. Whether Wen has the subjective intention of illegally occupying (other people's property), no one except Wen can directly know what he thinks subjectively. From the perspective of the judicial authorities, it would be best if Wen could actively admit his subjective thoughts, but in reality there are very few such people, and every suspect will try to rationalize and legalize his behavior as much as possible. Judicial authorities generally judge the subjective purpose of suspects based on their objective behavior. In this case, the most unfavorable behavior for Wen is that he lost contact after receiving 260 ETH from Xiao. In the absence of contrary evidence, Wen can indeed be identified as having the subjective intention of illegal possession;

Wen fabricated that he was proficient in cryptocurrency trading and deceived the victim by fabricating facts, causing the victim to mistakenly believe that Wen was really a "cryptocurrency trading master" and fall into a wrong understanding. Of course, if Wen's previous cryptocurrency trading "achievements" could be checked and indeed proved that he was a cryptocurrency trading master, it could alleviate his suspicion to a certain extent, but there may be no such evidence in this case.

The victim transferred his virtual currency to Wen based on his belief in Wen's persona as a cryptocurrency master (based on a misunderstanding), but Wen did not achieve the agreed results in the end and even lost contact. If, according to the provisions of Article 1, Item 4 of the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" (hereinafter referred to as the "9.24 Notice") issued by ten ministries and commissions of the State (including the "two high courts and one ministry") in September 2021, virtual currency investment behavior is a risk-taking behavior and is not protected by Chinese law, then Gao's transfer of ETH to Wen for cryptocurrency speculation is essentially a virtual currency investment behavior, which does not constitute a crime; but Wen's behavior towards Xiao fully meets the constituent elements of the crime of fraud in my country's criminal law.

There is also a prerequisite here, that is, virtual currency is considered property under my country's criminal law.

3. Is virtual currency considered property under criminal law?

So far, some judicial staff still believe that virtual currencies supported by blockchain technology, no matter whether they are mainstream or not, are not mainstream, that is, they cannot be treated as property under my country's criminal law.

However, if we carefully study my country's current regulatory policies on virtual currencies, we will find that virtual currencies should be treated as property under criminal law. The reasons are as follows:

(I) The view that regulatory policies regard virtual currencies as "virtual commodities" has not changed . In December 2013, the "Notice on Preventing Bitcoin Risks" jointly issued by the People's Bank of China, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Securities Regulatory Commission, the China Insurance Regulatory Commission and other departments stipulated that "in terms of nature, Bitcoin should be a specific virtual commodity "; in May 2021, the China Internet Finance Association, the China Banking Association, the China Payment and Clearing Association and other associations jointly issued the "Notice on Preventing Virtual Currency Trading Speculation Risks", which also stipulated that " virtual currency is a specific virtual commodity "; since then, the positioning of virtual currency as a virtual commodity has never been denied. Virtual commodities are also commodities, and since they are commodities, they have exchange value (price).

(II) When virtual currency is used as a criminal object, its property attributes are essentially reflected . Virtual currency can be used as a criminal tool, such as using virtual currency to launder money and accept bribes; at the same time, it can also be used as a criminal object. Nowadays, cases of fraud, theft and even robbery against virtual currency occur from time to time. If some judicial staff blindly ignore the property value of virtual currency and still treat it as computer information system data, it is inevitable that it is too out of touch with reality, which is a mechanical justice and cannot explain real life and protect the legitimate rights and interests of citizens.

(III) The exchange of virtual currency and legal tender is prohibited but cannot be completely banned . According to the provisions of the aforementioned "9.24 Notice", China will characterize the "exchange of virtual currency and legal tender " as " illegal financial activities " and prohibit them; at the same time, it also prohibits foreign virtual currency exchanges from providing services to mainland Chinese citizens through the Internet. The intention is to prevent Chinese citizens from using RMB to purchase virtual currency, but at the same time, the "9.24 Notice" does not prohibit Chinese citizens from investing in virtual currency. At this time, a group appears: U merchants, whose essence is the over-the-counter OTC of virtual currency exchanges, which engages in the exchange of virtual currency and legal tender and charges handling fees (price difference). The specific number of U merchants in mainland China cannot be counted, but judging from the large amount of registered user information on platforms such as Binance and Ouyi, the number is definitely not small. As long as there is a U merchant group, the channel for mainland citizens to purchase virtual currency will always exist and cannot be banned; even if there is no U merchant group, some people can obtain virtual currency through private transactions. The cornerstone of all this is that the consensus on virtual currency is too strong, especially the mainstream virtual currency. Therefore, even if the judicial authorities do not recognize the value of virtual currency, ordinary citizens have their own ideas. They not only recognize it but also actively participate in virtual currency investment transactions. At this time, the judicial authorities will be forced to re-recognize and treat the value of virtual currency.

(IV) Cases I have personally experienced . As a web3 lawyer, I mainly defend criminal cases. In the cases involving currency that I have represented, from the perspective of favoring the suspect, we also advocate that virtual currency is at most computer information system data, and that virtual currency investment and transactions are not protected by law in China. However, in current judicial practice, not only third-party appraisal agencies and price assessment agencies can determine the price of the virtual currency involved. In public judgment documents, there are even courts that directly refer to the market price of overseas virtual currency exchanges to determine the amount involved (such as Li's theft case (2020) Yue 0304 Criminal First Instance No. 2; Liu's extortion case (2019) Hu 0105 Criminal First Instance No. 790).

Although the author does not agree with the use of judicial appraisal, price evaluation or reference to market prices to determine the amount involved, it is certain that virtual currency, as property under my country's criminal law, has corresponding basis in criminal law theory, practice, and criminal policy. If you defraud others of virtual currency, especially mainstream virtual currency with a high degree of consensus, it is entirely possible to constitute fraud.

IV. Conclusion

Virtual currency has experienced more than ten years of development and evolution. At present, its future development and even growth trend is inevitable. In judicial activities, we need to face up to the existence of virtual currency, rather than blindly avoiding or even denying virtual currency. In a case involving currency pyramid schemes, a judge who was about to retire self-studied relevant knowledge online in order to study virtual currency, and downloaded virtual currency mobile wallet APP and virtual currency exchange by himself. Our communication with the judge was very smooth, and the final judgment was accepted by all parties in terms of legal application, evidence adoption and technical level argumentation.