Online platforms are unreliable.
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A few days ago, a client consulted us on a legal matter. We found the case quite interesting, and it is also a topic of concern for most virtual currency players. Today, we share this story with anonymized details to gather your perspectives and analyze the legal issues involved.
The plot of the story is not complex. Here is what happened.
Person A is a virtual currency player who held a batch of virtual currencies intended for sale. Coincidentally, Buyer Jia wished to purchase a batch of virtual currencies. The two parties’ interests aligned. After communicating via social media platforms, they agreed to conduct the transaction through an offline face-to-face meeting. On a pleasant day, the parties met at an agreed location. Person A observed that Jia was carrying a large bag upon arrival. After making contact, Jia, to gain Person A’s trust, voluntarily showed the bag to Person A and stated, “Look, this bag is full of cash. I am here today with the sole purpose of completing the transaction. Please transfer the virtual currencies to me first, and I will immediately give you the cash.” Person A deemed this reliable and transferred the agreed-upon virtual currencies in one lump sum to the wallet address designated by Jia. Once the virtual currencies arrived at Jia’s address, Person A reached out to take the cash. However, acting swiftly, Jia denied Person A the opportunity to receive the money, turned around, and fled with the bag full of cash. Watching Jia disappear into the distance, Person A fell into deep thought: Have I been defrauded?
Consequently, Person A reported the incident to the police. Thanks to the timely report, the police quickly apprehended Jia. Person A consulted us primarily to determine the potential criminal sentence Jia might face.
Although certain elements of the story are fictional, the main storyline is absolutely authentic and reliable.
To determine the length of Jia’s potential sentence, we must establish two points: What crime is Jia suspected of committing? What is the amount involved in the crime?
Only when these two points are clarified can we accurately predict the length of Jia’s prison term.
In this case, an interesting phenomenon arose regarding the characterization of the crime. I consulted my colleagues at the law firm; some believed it should be characterized as snatching or robbery, while I considered theft to be a more accurate classification. I also asked a non-legal professional to offer their opinion based on their intuitive sense of justice regarding the appropriate charge for Jia. Their answer was that Jia committed fraud.
Everyone has their own perspective on the characterization of this case, with significant differences among these viewpoints. However, after careful consideration, I believe that the intuitive legal sense of the non-legal professional is quite reliable.
First, let us consider snatching or robbery. Although Jia turned and fled immediately after receiving the virtual currencies, which may resemble the circumstances of robbery or snatching, one must not overlook a crucial fact: Jia did not assault Person A, threaten Person A with violence, nor did Person A attempt to snatch the bag of money back from Jia. In other words, there was no violence against the person or against property, which constitutes the key distinction between robbery and snatching. Therefore, in the absence of violence by Jia, characterizing Jia’s actions as robbery or snatching would be clearly inappropriate.
Second, regarding my initial view of theft. Upon serious self-reflection, this characterization proves even less reliable. My primary reason for initially considering theft was based on Professor Zhang Mingkai’s criminal law theory that public theft can constitute the means of theft. He argues that as long as the perpetrator believes their method of theft is secret and unknown to others, it can constitute the crime of theft, even if the act occurs in public. However, the prevailing theory in criminal law does not support this view. Only secret stealing constitutes the crime of theft; the concept of “public theft” is not recognized by judicial authorities. Therefore, my initial assertion of theft was ultimately futile.
Finally, we consider the crime of fraud, as suggested by the layperson based on their intuitive sense of justice. After careful deliberation, I conclude that fraud is the most appropriate charge.
Fraud involves fabricating facts or concealing the truth, thereby causing the victim to fall into a mistaken belief and voluntarily dispose of their property based on that mistaken belief. In this case, had Jia not concealed his intention not to pay Person A, or had he not fabricated the fact that he intended to pay Person A, Person A would never have transferred the virtual currencies to the address designated by Jia. In retrospect, this reasoning is correct. Why did I not initially consider this angle? I estimate it was because the time interval between the fraudulent act and the acquisition of property was so short that it appeared negligible.
Generally, in criminal law, crimes such as theft, robbery, and snatching involve acts where the criminal conduct and the acquisition of property occur almost simultaneously, with no time lag. In contrast, crimes such as fraud, extortion, and kidnapping typically involve a certain temporal and spatial interval between the criminal act and the acquisition of property. This mental stereotype caused me to overlook the existence of fraud. It seems there is some truth to the saying, “Studying law for too long makes one lose touch with common sense.”
After determining the charge, we must examine how to ascertain the amount involved in the crime. Given the ambiguous legal status of virtual currencies in China, methods for determining the amount in crimes involving virtual currencies vary widely, with numerous approaches employed.
The first method uses the platform trading price at a specific point in time as the standard. In the criminal judgment (2018) Zhe 01 Xing Zhong No. 333 by the Hangzhou Intermediate People’s Court, the court determined the criminal amount involved based on the statement that “the price reflects the market price of Ripple at the time of the incident.” However, after the People’s Bank of China issued notices emphasizing that virtual currency transactions are prohibited, using exchange market prices to determine the criminal amount became inappropriate. Since then, this standard has rarely been applied.
The second method uses the proceeds from disposing of the stolen goods. In the criminal judgment (2020) Hu 0106 Xing Chu No. 551 by the Shanghai Jing’an District People’s Court, the court adopted the price at which the defendant disposed of the stolen virtual currencies to determine the amount for theft. The court reasoned that, referencing the Supreme People’s Court’s judicial interpretation on theft—which allows the amount from disposing of stolen goods to determine the criminal amount in other theft scenarios—it was appropriate to apply the disposal proceeds standard in this case.
A third method, which I have personally encountered although it lacks prior precedent, occurred in a case I handled involving the collapse of a platform. Acting as the agent for the victims, I submitted materials to the public security organs and requested bank statements or other evidence showing the fiat currency used to purchase the virtual currencies. I estimate that the public security organs intended to determine the criminal amount based on the victims’ actual purchase expenditures.
Besides these methods, there are others, such as relying on amounts determined by Price Certification Centers or merchant pricing, which I will not detail individually. Why mention this? As our readers, you need only understand that there are numerous ways to determine the criminal amount. Since there is no unified national standard, each method has its rationality. As lawyers, our strategic approach differs depending on whether we represent the victim or the defendant. We cannot limit ourselves to a single method, as doing so might adversely affect our client’s interests. Therefore, regarding the determination of amounts, much like supreme martial arts techniques, the best strategy is formlessness, where everything unfolds implicitly.
The above explanation regarding this consultation has been quite lengthy. Dear readers interested in legal education, do you understand? If you have further questions, please scan the QR code to add us on WeChat for a detailed one-on-one discussion.
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