Hidden Criminal Traps Beneath the Cultural Boom
In 2023, the founder of a well-known NFT platform was placed under investigation for suspected illegal absorption of public deposits, with the amount involved exceeding RMB 500 million;
In 2024, a "metaverse land" project was characterized as disguised fundraising due to its promise of high returns, resulting in total losses for investors...
Web3Behind the industry's vigorous development, the boundaries between NFT projects' operational models, capital flows, and criminal legal risks are becoming increasingly blurred. As an entrepreneur, you may be mistakenly judged as committing a crime due to your "innovative model." How can we uphold the legal bottom line in NFT projects, and how should we defend our own rights and interests?
High-Frequency Criminal Charges in NFT Projects
(I) Crime of Illegally Absorbing Public Deposits
Why are NFT projects frequently involved in the "crime of illegally absorbing public deposits"?
According to Article 176 of the Criminal Law, the core elements of the crime of illegally absorbing public deposits include:Public promotion without permission、Promise of returns、Absorbing funds from unspecified objectsetc.
During the operation of many NFT projects, one may inadvertently become involved in such activities:
Publicly promoting "limited sales" and "scarcity-driven appreciation" through social media and communities;
Disguised promises of returns through models such as "staking for mining" and "holding for dividends";
Attracting public funds into the market through secondary market speculation...
It is precisely these characteristics of NFT projects that have led to their "inextricable link" with the crime of illegally absorbing public deposits.
If an NFT project, under the guise of "digital collectible investment" or "equity splitting," publicly promotes to unspecified objects and promises principal protection with interest or high returns (such as "daily dividends" or "regular buybacks"), and has not obtained financial business permits, it meets the characteristics of this crime.
For example, in judicial case (2024) Yu 03 Xing Shen No. 77, Huang Moumou's act of absorbing funds under the pretext of "Yew Tree Investment" was determined to constitute the crime of illegally absorbing public deposits; the Supreme People's Court's judicial interpretation also clarifies that illegally absorbing funds through virtual currency transactions constitutes illegal fundraising behavior.
Article 2 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fundraising (2022 Amendment)
Whoever commits any of the following acts, meeting the conditions stipulated in Paragraph 1 of Article 1 of this Interpretation, shall be convicted and punished for the crime of illegally absorbing public deposits in accordance with the provisions of Article 176 of the Criminal Law: ... (8) Illegally absorbing funds through online lending, equity investment, virtual currency transactions, etc.; ... (12) Other acts of illegally absorbing funds.
(II)Crime of Fundraising Fraud
The core characteristic of the crime of fundraising fraud is the need to prove that the perpetrator had the "purpose of illegal possession," specifically manifested by fabricating projects, concealing the true use of funds (such as using raised funds for personal extravagance or transfer), borrowing new to repay old, etc.
In judicial practice, the determination of illegal fundraising involving NFTs often tends towards the principle of "substantive penetration" and focuses on the flow of funds:
1. Principle of Substantive Penetration Regulation
Courts tend to characterize based on the substance of the transaction rather than its technical form. For example, although a platform operated under the name of "digital collectibles," because it set up a secondary market and promised principal protection with rebates, it was ultimately determined to constitute the crime of fundraising fraud rather than an ordinary contract dispute.
2. Flow and Use of Funds
If the funds of an NFT project are not used for the development of the underlying assets as claimed, but are used to pay interest to early investors or cover other operating losses, this can directly corroborate the "purpose of illegal possession," potentially escalating the charge from the crime of illegally absorbing public deposits to the crime of fundraising fraud; alternatively, if an NFT platform falsely claims cooperation with well-known institutions (such as museums or cultural associations) or fabricates the value of underlying assets (such as forging the scarcity of collectibles), and absconds with the funds after attracting investment by manipulating prices, it may also constitute this crime. The "Tonggu Platform" case tried by the Shanghai Minhang District Court falls into this category. In a typical case of the Shantou Intermediate People's Court of Guangdong Province, Huang Mouyan was determined to have committed the crime of fundraising fraud for fabricating investment projects and transferring funds.
Other Related Charges in NFT Projects
(I)Crime of Illegal Business Operations
If an NFT platform unauthorizedly conducts financial businesses such as payment settlement or foreign exchange conversion without approval (such as using USDT for fiat currency exchange), it may violate this crime. In reference cases, acts of illegal foreign exchange trading using virtual currencies have been determined to constitute the crime of illegal business operations.
(II) Crime of Money Laundering or Crime of Concealing or Disguising Criminal Proceeds
If NFTs are used as a means to transfer illegally raised funds (such as whitewashing funds through multi-layer transaction chains), it may involve such crimes.
Directions for Criminal Compliance and Risk Control for NFT Entrepreneurs
(I) Front-loading Criminal Compliance
NFT issuance must clarify ownership relationships, ensure genuine on-chain recording, and avoid false advertising;
The design of NFT models should avoid disguised absorption of public funds through forms such as "equity splitting" or "transfer of income rights."
NFT issuance should note the stripping of financial attributes, strengthening the cultural, marketing, and usage value of digital collectibles (such as combining with physical rights and interests);
Retain evidence such as community promotional content and user agreements to prove the absence of "principal protection promises."
(II) Crisis Response Strategies
When encountering user complaints on the platform or when problems arise due to poor management caused by operations, market conditions, partners, etc., one should respond actively, explain the situation, properly handle user conflicts, and report to local regulatory authorities when necessary to prevent the problem from expanding and escalating into criminal risks.
If indeed placed under investigation, actively cooperate with judicial organs, explain the platform's development process, clarify the flow of funds, and reach compensation plans to reduce one's own liability.
In a recent fraud case involving a digital collectible platform that we represented, the operator of the digital collectible platform was accused of suspected fraud. The cause was that users purchased collectibles with an investment mindset, suffered losses due to market fluctuations, and the platform shut down due to the industry downturn. Some users reported the case, and the public security organ initiated an investigation for suspected fraud. After Mankun lawyers intervened, they communicated orally and in writing with prosecutors multiple times, integrating core disputed points such as "the platform had no subjective intent or objective behavior for fraud," "no purpose of illegal possession," "income belonged to lawful business proceeds," and "doubts about the authenticity of evidence," launching a multi-dimensional defense for innocence. After two returns for supplementary investigation, Mankun lawyers still insisted that the facts of the case were unclear and the evidence was insufficient. Ultimately, the Procuratorate made anon-prosecutiondecision, safeguarding the legitimate rights and interests of the party concerned.
Why Choose Mankun?
Mankun's criminal team focuses on the field of digital economy crimes, pioneering a "technology + law" dual-track defense strategy:
✅ Technical Understanding: Team members have Web3 industry/knowledge backgrounds, able to translate Web3 technical language into legal terminology understandable by case-handling authorities, interpreting NFT business logic;
✅ Similar Case Database: Covering domestic NFT-related criminal cases across the country in the past three years, extracting 20+ effective defense points;
✅ Rich Practical Experience: Mankun's Criminal Legal Affairs Department provides special legal services for criminal risk prevention and control to dozens ofNFTdigital collectible platforms nationwide, helping platforms land smoothly.
Successful Cases Related to NFTs
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Providing criminal defense forNFTcriminal cases involving digital collectible platforms in Shanghai, Henan, Anhui, Fujian, Heilongjiang, Shandong, and other regions
Mankun has represented several personnel in the digital collectible industry in Shanghai, Henan, Anhui, and other places in criminal cases involving fraud, illegal absorption of public deposits, and fundraising fraud, with multiple cases currently being handled. Partial cases include: Representing the legal representative of a certain digital collectible company in Shanghai in a fraud case, where the Procuratorate made a decision not to approve arrest within 37 days, and the public security organ voluntarily withdrew the case; representing a shareholder of a certain digital collectible project in Henan in a fraud case, where the Procuratorate returned the case for supplementary investigation due to "unclear facts and insufficient evidence," and the public security organ voluntarily withdrew the case; representing the actual controller of a certain digital collectible project in Henan in a fraud case, submitting legal opinions regarding inducement during the investigation stage, prompting the Procuratorate to face the case squarely and truthfully record facts favorable to the party in the interrogation records.
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From 2022 to 2023, Mankun's Criminal Legal Affairs Department provided special legal services for criminal risk prevention and control to dozens ofNFTdigital collectible platforms nationwide, helping platforms land smoothly
Representing dozens of digital collectible companies in Jiangsu, Henan, Hainan, Guangxi, Hebei, Sichuan, Anhui, Inner Mongolia, and other regions, compiling industry written reports, summarizing relevant laws, regulations, and policies, and providing assistance to relevant departments in understanding the background of the digital collectible industry and industry policies. Mankun tailored key content based on specific information of different platforms, combined with the degree of criminal risk involved (or being questioned, initially investigated, having office equipment controlled, etc.), assisting platform personnel in sorting out operational situations regarding changes in business entities, IP licensing, marketing promotion, and other aspects, providing legal services for the orderly exit of platforms, all achieving good results.
Final Thoughts:
Technological innovation should not come at the cost of criminal risks. Whether for entrepreneurs or investors, consulting a lawyer three hours in advance may avoid three years of imprisonment or recover asset losses of three million.
Mankun Law Firm Web3 Criminal Practice TeamFocusing on Web3 criminal defense, criminal risk prevention and control, and recovery of losses from virtual assets, using professionalism to guard the vast stars and seas of the Web3.0 industry, ensuring that Web3.0 occurs legally in China.
