It is not new for OTC merchants in the currency circle to be identified as “trust crimes” or “concealment” crimes. However, it is purely discussed from the perspective of “laws and facts”—these “OTC merchants” who invest in virtual currencies to make price differences are really all Can it be determined as “crime of helping information cybercrime” or “crime of concealing criminal proceeds and proceeds?” Prosecutors or courts can really be sure that they subjectively know or ought to know that the stolen money received from selling coins is “knowingly or ought to know” “The situation?
On February 23, 2021, the twelfth of the first month of the lunar calendar, we received a number of calls from the suspect’s family members requesting the protection of the suspect’s legal rights and interests. After investigation, it was found that the suspects were all merchants doing “fiat currency and token exchange” at the “virtual currency exchange”. Because they received the stolen money, they were taken away and detained by the public security organs in other places. Two of the cases have been arrested. The suspected charges are: “crime of helping information cybercriminal activities” and “crime of concealing criminal proceeds and proceeds”.
From the 12th to the 20th of the first month of the lunar calendar, for eight days, I took my assistants to Anhui, Guangdong, Gansu and other places to discuss with the public security organs and procuratorates in many places. To prosecute the suspect for the crime of “trust” or “concealment”?
(1) We must first figure out what is “virtual currency OTC transaction”?
In my opinion: “virtual currency OTC transaction”-is “the middleman makes the difference”, collect the seller’s currency at a low price, and then sell it to the buyer at a high price.
Log in to “a virtual currency exchange website” and you can see:
1. Click on the link “Buy” (which means OTC merchants are selling coins to you). We found that there are at least 40 pages and hundreds of merchants selling USDT in USDT; the unit price of the purchase ranges from RMB 6.56 to 7.23;
2. Similarly, when we click on the “sell” link (which means OTC merchants buy coins from you), we find that the merchants who buy USDT have at least 60 pages and hundreds of them; the unit price of the sale ranges from RMB 6.57 to 5.76 ；
Tether (USDT) is a token Tether USD (hereinafter referred to as USDT) launched by Tether based on the stable value currency U.S. dollar (USD). 1USDT=1 U.S. dollar. Users can use USDT to exchange 1:1 with USD at any time—similar to : Used as a substitute for betting in gambling establishments. It is used to represent cash in casinos and is generally designed as a coin-like round chip.
For example, the official price of a casino chip is 7 yuan a piece; however, when you enter the casino to get cash and exchange it with an intermediary, the intermediary will give you 7.1 yuan a piece; however, if you make money to get out of the casino, you need to transfer the chips. When cash is turned into cash, the intermediary collects chips at a price of 6.9 yuan each; in this way, the intermediary earns two cents for each chip. The way to make money for digital currency OTC merchants is here!
In “a virtual currency exchange”, we click on the order information interface of any merchant, the merchant named “Cai Cai Shang Pu” buys USDT at a price of 6.55 yuan, and then sells it at a price of 6.57 yuan. Give a USDT and earn a difference of 2 cents in RMB.
Seeing this, people outside the public security bureau and the currency circle will definitely question:
1. “Why doesn’t USDT have a unified price, but a price difference of a few cents, so that these OTC merchants can speculate and make the difference?”
2. Why don’t most consumers choose the cheapest OTC merchants to buy with him? Then, choose the one with the highest price and sell it to him?
This is because there are some risks in the process of consumers buying and selling digital currencies with renminbi and other legal currencies. For example, when buying coins, consumers usually make payments first, and then the merchants who sell the coins will issue the coins; however, In the past, some merchants did not issue coins after receiving the money, and there was a breach of contract; therefore, consumers not only looked at which merchant had a low price, but also looked at which merchant had a good reputation.
In addition, consumers are likely to receive stolen money during the “sale of currency for renminbi”. Once they receive the stolen money, they will easily be frozen by the public security organs. Even if the transaction records can be released later, they should communicate with the public security organs. It is also more cumbersome. Therefore, it is particularly important to choose a reliable “customer” to sell coins.
Therefore, the difference between the purchase price and the selling price of USDT merchants is purely a feature of the virtual currency industry. This means: the better the reputation of the “merchant”, the more consumers choose to trade with the merchant, and the greater the profit margin of the merchant.
(2) Is it illegal to invest in USDT to earn the difference?
According to the “Announcement on Preventing the Risk of Token Issuance and Financing” issued by the People’s Bank of China on September 4, 2017, it is clear: “Any organization or individual shall not illegally engage in token issuance and financing activities.” However, it does not prohibit the private sector. Hold, invest and trade digital currencies.
The second-instance case of property damage compensation dispute between Yan Xiangdong and Li Shengyan, etc. heard by Shanghai No. 1 Intermediate People’s Court, and the first-instance case of contract dispute between Feng Yiran and Beijing Lekuda Network Technology Co., Ltd. heard by Beijing Haidian District People’s Court. In addition, there are Hangzhou Internet Court, Taizhou Intermediate Court, etc. The courts all agreed that: “The People’s Bank of China and other ministries have issued the “Notice on Preventing Bitcoin Risks” (2013) and “Regarding the Prevention of Token Issuance Financing Risks”. Announcement (2017) and other documents, although the legal status of such “virtual currency” as currency is denied, the above regulations do not deny its property as a commodity, and my country’s laws and administrative regulations do not prohibit Bitcoin. Hold.
The “Notice on Preventing Bitcoin Risks” even mentions that “in terms of nature, Bitcoin should be a specific virtual commodity.” Therefore, Bitcoin has the attributes of virtual property and virtual goods and should be protected by law. “
Therefore, I believe that “it does not violate our country’s current laws and regulations by simply buying and selling digital currencies from exchanges based on market conditions.” However, if this is the business, OTC merchants buy and sell digital currencies to make a large price difference, whether this involves the issue of “illegal business crime” is another matter.
(3) What grounds does the procuratorate use to “approve arrests” or even “review and prosecute” OTC businesses?
Through the many people’s public security and people’s procuratorates visited by the author, I found that most public and procuratorate personnel are very serious and responsible, and are very willing to deal with the obscure professional knowledge in the digital currency industry and the application of laws. Discuss with a lawyer.
The “approval of arrests” or even “review and prosecution” of OTC businesses by the procuratorate is by no means “unreasonable” as the suspect thinks. The procuratorate’s reasoning is: “When merchants sell digital currency, the receiving account is often frozen by the public security organs. However, the merchant still continues to apply for bank cards to sell virtual currency to collect payments. Therefore, this is the introduction-“The merchant knows that others You often launder money or sell stolen money by selling coins, and you continue to open your card to sell coins.”
The logic of the prosecutor’s office is: because you were frozen cards for selling coins before, you should know that this industry is risky, and you should know that there are definitely people who use coins to launder money or sell stolen goods. Therefore, if you don’t care about frozen cards , Continue to open your card to sell coins, it shows that you are a laissez-faire attitude towards money laundering or stolen money, and it is even helpful! Therefore, if you sell coins and receive stolen money again, it constitutes “helping information cybercrime” or “concealing the proceeds of crime”.
(4) Although I understand the logic of the procuratorate, I don’t think so from the legal principle!
An analogy: Zhang San opened a restaurant and knew that buying cooking oil in a supermarket might be at risk of buying cooking oil. Sure enough, I really bought cooking oil, and then the consumer ate the food made by Zhang San, which caused food poisoning; then, Zhang San continued to run the restaurant, also buying cooking oil in the supermarket. As a result, Zhang San encountered it again. Consumers have food poisoning because of eating waste oil.
Excuse me, because the consumer ate the cooking oil in the Zhang San restaurant, which caused food poisoning; the second time, the consumer suffered food poisoning. If Zhang San bought the oil through a regular supermarket, may I ask, Zhang San does not belong to Helper in the production of waste oil? Should it be inferred that Zhang San had “knowingly or ought to know” the edible oil he bought for the second time?
The same reason: the above logic of the procuratorate is: once the merchant’s money-selling collection account is frozen, the transaction must be stopped, otherwise the frozen account of the stolen money received in the transaction again will constitute a crime! If the public security agency clearly informs the “a certain digital currency buyer” that the payment funds are stolen money at the beginning of freezing the merchant’s account, but the merchant continues to choose to trade with the buyer, the merchant constitutes a crime of “helping information cybercriminal activities” Or “cover the crime of concealing the proceeds of crime”, this is beyond doubt!
But the facts are: “A certain bank card of the merchant was frozen by the public security organ in a certain place because of unknowingly receiving the stolen money. For the time being, it is not known whether the merchant knew that the buyer’s funds belonged to the stolen money and whether the account could be unfrozen. This thought-“merchants cannot continue to engage in digital currency trading”! May I ask, does the law stipulate that once a currency is sold and an account is frozen, it will not be possible to buy or sell digital currency in the future?
Therefore, the procuratorial organ stated: “In the process of merchants selling digital currency, the receiving account is often frozen by the public security organs. However, the merchants still continue to apply for bank cards to sell virtual currency to collect payments. Therefore, the merchant knows that the transaction amount is Stolen money”. The author does not dare to agree with this method of inference! Fighting crime in this way has seriously expanded the scope of the attack.
(5) From the perspective of risks and benefits, I don’t think OTC merchants “know” about the stolen money received from selling coins
We know that the spread of most OTC merchants buying and selling digital currency (USDT) is only 1-2 cents, and the market price of a USDT is similar to one U.S. dollar, which means that only by buying and selling USDT worth 7 million yuan can be earned by Shurong. To 10,000 to 20,000 yuan, the rate of return on investment: 0.14%-0.28%. This is fully in line with the trading market of digital currency trading intermediaries, and there is no behavior that is significantly higher or lower than the market price. Just imagine, if you are helping others commit a crime, how can you charge such a low fee? The benefit is not proportional to the completion of the risk!
The above is my point of view. Through communication, some public security organs and procuratorates have recognized it to a certain extent. In fact, the root cause is-“In recent years, telecommunications network fraud has become rampant in our country, and it has brought extremely huge property losses to our victims.”
The criminals who really engage in telecommunications fraud are all outside China, such as Malaysia, Cambodia, Myanmar, etc.; in addition, the scammers are not only Chinese, most of them are Taiwanese, and the victims who are deceived are basically all residents in China!
This has led to the fact that it is difficult for the police in our country to investigate and obtain evidence. The country where the scammer is defrauded is not a native of the country and did not infringe on the interests of their country. Therefore, the police in the country where the scammer is located are not willing to waste their country’s judicial resources. To catch the scammers; at the same time, if the scammers are foreigners, there is also an issue of international jurisdiction. Even if the scammers are caught, their country will not easily hand the scammers to the Chinese police. This indirectly led to the increasingly rampant telecommunications network fraud!
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.