Attorney Shao Shiwei | How to Recover USDT Worth RMB 40 Million Lost in a Fraudulent Transfer?

How Can My USDT Be Recovered?

 

Introduction:

 

A few days ago, I received a consultation from a friend who stated that he had transferred USDT equivalent to approximately RMB 40 million to a certain USDT dealer, but the counterparty failed to remit the corresponding funds and has since become unreachable. He asked me what steps he should take. In fact, among the cases I have handled, this type of scenario is highly common and frequently occurring. Therefore, I provide a consolidated analysis here.

 

01

Challenges in Converting USDT in the Crypto Community

The client, Mr. Wang, sought to liquidate his USDT holdings. Given the substantial amount involved, Mr. Wang entrusted his friend, Xiao Zhao, to identify a reliable USDT dealer. Xiao Zhao then contacted Xiao Z, a USDT dealer with whom he had frequently collaborated.

Xiao Zhao had been cooperating with Xiao Z for several years, with transaction volumes amounting to tens of millions of yuan. As long-term online acquaintances who had never met in person, they maintained a strong relationship of trust. After Mr. Wang approached Xiao Zhao, Xiao Zhao, without further deliberation, transferred the USDT received from Mr. Wang to the wallet address provided by Xiao Z.

Several days later, seeing no response from Xiao Z, Xiao Zhao became anxious and asked, “What is going on? As before, shouldn’t you have promptly remitted the RMB to my account after deducting your service fee? My investor is waiting.” Xiao Z consulted his intermediary, X, who in turn queried his own intermediary, Y. Y stated, “I have already transferred the USDT to a cryptocurrency exchange, but my account has been frozen. I am trying to resolve the issue. If you want your money back, you must allow me at least six months, and I will charge a 15% service fee.”

Based on the descriptions involving shifting responsibility among the parties, we have been able to reconstruct the full picture. The USDT payment chain can be summarized as follows:

Mr. Wang (the ultimate investor) → Xiao Zhao (collection and payment agent) → Xiao Z (USDT dealer) → X → Y

Two weeks passed... then a month passed... The USDT in question disappeared without a trace, with no further communication. Despite repeated communications and negotiations between Mr. Wang, Xiao Zhao, and Xiao Z, the interactions became increasingly contentious, and Xiao Z eventually became unreachable. Mr. Wang grew increasingly concerned.

(Note: To protect client privacy, case details have been anonymized. This article is intended solely for theoretical discussion.)

 

02

What Should Mr. Wang Do?

Last weekend evening, after Mr. Wang contacted me, he urgently asked what should be done now. Based on Mr. Wang’s account and a review of the parties’ communication records, the foregoing basic facts have been clarified.Although Mr. Wang was very anxious, I advised him not to panic.

There are several issues that we need to clarify first.

1. Where did so muchUSDTcome from?

From the client’s perspective, it is normal to want to know how to deal with those who absconded with the funds. However, from the perspective of a seasoned criminal defense lawyer, I am more concerned about the source of the client’sfunds—this is the prerequisite for resolving all subsequent issues.

The primary reason is that it is necessary tofirst assess whether the client himself faces any criminal liability risks.。

After all, I have handled numerous cases in which individuals seeking relief inadvertently implicated themselves in criminal conduct (disclaimer: this has no bearing on my personal involvement; I only learned why the detained party was held after accepting the engagement and meeting them in the detention center; indeed, in certain cases, the identities of victim and suspect can shift in subtle ways...). This is a long story, so let us return to the main topic.

Because both Mr. Wang and Xiao Zhao have long resided overseas, I was consistently concerned, as the client described the matter, about whether the source of the client’s USDT (Tether) was lawful and whether there was a risk of illegal business operations arising from disguised foreign-exchange trading. (For reference, see the author’s prior articles: “A Comprehensive Overview: Potential Criminal Charges for Providing Accounts to Assist Others in Transferring Funds》，《Arrested for Profiting from Price Spreads in USDT (Tether) Trading: How to Conduct an Effective Criminal Defense? — Criminal Risks Facing OTC Merchants: The Crime of Illegal Business Operations (Part II)”). However, upon inquiry, it was learned that the USDT transferred out was earned through ordinary business activities, and that the transfers from Mr. Wang to Xiao Zhao and from Xiao Zhao to Xiao Z were all routine. Accordingly, it is preliminarily determined that the source of the USDT involved in the case is clean, and that only one-way over-the-counter transactions between USDT and RMB are involved, without any disguised foreign-exchange trading.

Thus, Mr. Wang’s own criminal risk can be excluded.

2. How Can Mr. Wang Protect His Rights?

Step One: Who Is the Party Bearing Liability?

All information obtained by Mr. Wang and Xiao Zhao was conveyed through Xiao Z; whether X and Y exist remains unknown, and the cryptocurrency transfer addresses were also provided by Xiao Z. As a USDT acquirer/merchant, Xiao Z charged handling fees and had a stake in the matters at issue. He is currently unreachable.

Therefore, Xiao Z’s conduct meets the characteristics under the Criminal Law of fabricating facts or concealing the truth to defraud others of their property, and is suspected of constituting the crime of fraud. If X and Y exist and those two individuals refuse to make payment without legitimate justification, they would constitute joint offenders in the crime of fraud.

Step Two: Which Approach Should Be Adopted to Protect Rights? Civil Litigation or Criminal Complaint?

Mr. Wang and Xiao Zhao considered, and did not wish to escalate the matter (primarily due to the large amount of funds involved and concerns about their own risks), whether they could pursue civil remedies to hold Xiao Z liable for unjust enrichment?

In fact, this is very difficult.Pursuant to Article 985 of the Civil Code of the People's Republic of China, where a beneficiary obtains unjust enrichment without legal basis, the person who suffers loss may request the beneficiary to return the benefits obtained.

Unjust enrichment here refers to a situation where a party obtains improper benefits without legal basis. Therefore, in practice, even if the parties have not signed a relevant contract, as long as the court finds that their transactions have certain reasons and background, it will dismiss the plaintiff's claims (in other words, only transfers made by mistake without any cause meet the legal definition of "unjust enrichment"). In this case, Xiao Zhao and Xiao Z had cooperated multiple times; each time Xiao Zhao transferred crypto assets, they were sent to the address involved in the case provided by Xiao Z. In their transactions, Xiao Zhao sought to obtain fiat currency, while Xiao Z sought to obtain transaction fees. Thus, their dealings were not entirely without basis.

Step Three: How to Determine the Proper Jurisdiction for the Case?

Therefore, the only recourse in this case is to file a criminal complaint. The subsequent question is: where should such a complaint be filed to protect one's rights?

According to the client's description, Xiao Z is within China, and according to Xiao Z, X and Y are also within China. However, the statements attributed to X and Y are all relayed through Xiao Z, and their authenticity remains unknown. Therefore, in accordance with Chinese laws and considering the clues currently available to the client, it would be most convenient to report the case at the location of Xiao Z's household registration.

Article 15 of the Provisions on the Procedures for Handling Criminal Cases by Public Security Organs (2020 Amendment) stipulates that criminal cases shall be under the jurisdiction of the public security organ at the place where the crime was committed. If it is more appropriate for the public security organ at the residence of the criminal suspect to exercise jurisdiction, such organ may assume jurisdiction. The place where the crime was committed includes both the place where the criminal act occurred and the place where the consequences of the crime occurred.

Following the above analysis, Mr. Wang has finally formed a general approach. However, the path to protecting his rights is long and arduous, with much ground still to be covered.

 

03

Mankun Lawyer's Reminder

Although over-the-counter (OTC) trading is simple, quick, and offers low fees, it lacks transparency and carries extremely high risks. Under the current policy landscape, there is a risk in judicial practice that such transactions may be deemed invalid contracts. Nevertheless, it is still advisable to execute a contract with the counterparty and retain their identity information to facilitate potential future rights protection efforts.