Recently, everyone has been discussing the tokenization of various types of assets.
The list of underlying assets on the real-world assets (RWA) menu is also growing: office buildings, photovoltaic power stations, gold reserves, accounts receivable, and so on. Combined with promotional language such as "anchored to physical assets" and "stable returns," a token-issuance fundraising project is thus dressed in the cloak of the real economy.
In reality, many RWA projects cannot produce valid documents of title to the underlying assets; the so-called SPVs are merely shell entities with no actual business; and the funds raised disappear after being transferred through a few wallets.
When fundraising is likewise carried out on the basis of fictitious assets, why are some cases characterized as the illegal absorption of public deposits, while others are directly found to constitute fundraising fraud?
Fictitious assets do not directly equate to fundraising fraud.
Fictitious assets are merely a means of deception; they address the question of whether the project fabricated facts to mislead investors.
To establish fundraising fraud, the core subjective element must also be satisfied:
at the time the project party obtained the funds, it did not intend to use the funds for the agreed purposes and had no intention of repaying investors—that is, what criminal law calls the purpose of illegal possession.
Where the underlying assets are fictitious, whether the funds raised were actually invested in the project's operations or, once received, were diverted from the project for personal disposal is evaluated entirely differently under the law.
Where the underlying assets are entirely fabricated and the funds are diverted from operations, fundraising fraud is highly likely to be found.
The underlying assets cannot be verified, yet the project claims externally to hold overseas commercial real estate and power station revenue rights; the so-called due diligence materials provided to investors are merely spliced images and valuation reports of unknown origin.
The white paper repeatedly emphasizes "anchored assets," "rigid repayment," and "stable high annualized returns," yet avoids any discussion of the asset registration entity, whether any mortgage or seizure exists, or the basis for valuation.
Whether the funds raised are stablecoins or fiat currency, the funds quickly leave the project operating entity and flow into private wallets, are used to repay old debts, are squandered personally, or are used to fill funding gaps in other projects.
In judicial practice, such circumstances will be presumed to involve an intent to illegally possess.
Here, the real-world assets (RWA) concept has been reduced to a tool for packaging an ordinary Ponzi scheme as a physical project.
The scope for defense in such cases is often limited; the main breakthrough point for the defense is to rebut the presumption of intent to illegally possess, which requires submitting evidence of the ownership of the real assets and account records showing that the funds were actually invested in operations; if such evidence cannot be presented to rebut the presumption, it will be very difficult to achieve a defense resulting in a lesser charge.
It is rare for the underlying assets to be entirely fictitious while the funds are used for operations,because the project has no physical assets that can generate returns and no business source capable of delivering the advertised returns; even if money is spent on the project, it is only for platform maintenance and the operating expenses of the fundraising tool, rather than for the production and operation activities of the underlying asset project.
Rare, which also means there exists, for example:
the project party raises funds through a fictitious asset narrative, but the funds are indeed retained, with plans to subsequently acquire or build the corresponding underlying assets, and the scheme collapses before such plans are implemented.
In this case, one cannot directly determine fundraising fraud based solely on the fact that the assets are fictitious; a comprehensive assessment must still be made in light of the use of funds and the repayment model.
Where the underlying assets are partially untrue but the funds are used for project operations, it is highly likely to be determined as illegal absorption of public deposits
The situation in more RWA projects:
It is true that some genuine underlying assets existed and that cash flow was generated at some point; the asset scale was merely deliberately exaggerated and expected returns inflated, packaging thirty percent as one hundred percent. The project ultimately collapsed because of operational failure and a broken funding chain, not because the promoter absconded with the funds.
Most projects of this kind are characterized as the crime of illegally absorbing public deposits. This crime primarily evaluates the fundraising conduct itself: conducting fundraising without permission (illegality), publicly promoting to society (publicity), promising repayment of principal and interest or payment of returns (inducement), and absorbing funds from unspecified persons (sociality). All four elements must be present simultaneously for the crime of illegal absorption to be constituted.
Inducement is not limited to an express written guarantee of principal; implying asset backstopping, deficiency top-ups, or promising priority distribution of returns all count.
Compared with the crime of fund-raising fraud, the crime of illegally absorbing public deposits leaves greater room for defense, as well as room for leniency through pleading guilty and accepting punishment and through restitution and compensation.
Main focus areas of judicial authorities in real-world assets (RWA) cases
1. Ownership of off-chain assets.
No matter how perfectly the asset story is written in the white paper, on-chain smart contract code cannot replace the legal effect of official off-chain ownership registration.
Judicial authorities will verify three matters: in whose name the asset is registered, whether there are encumbrances such as mortgages or seizures, and whether the asset can be disposed of independently.
2. Fund pathways.
From which on-chain address the funds flowed in, through which intermediaries they passed, and where they ultimately and actually flowed, so as to determine whether the raised funds were used for the project's business operations.
3. Whether there was moderate exaggeration in promotion or complete fabrication of facts.
Actually having only thirty percent of the assets while promoting one hundred percent externally constitutes exaggerated promotion, which mainly affects sentencing;
If an asset is claimed to exist but objectively does not exist at all, this constitutes fabricated facts and is directly linked to the assessment of the intent to illegally possess.
Risk warnings for project parties, intermediaries and investors
Project parties should implement three things before conducting business:
First, complete the ownership documents for the underlying assets, retain registration information and encumbrance materials in full, and ensure the SPV entity genuinely holds the assets and completes asset transfer; it cannot be merely a shell;
Second, implement fund custody and record-keeping, ensure raised funds enter compliant accounts, and ensure every expenditure matches the publicly stated use;
Third, ensure promotional content is consistent with objective facts, and remove expressions such as "principal guaranteed", "stable returns" and "rigid repayment".
In addition, it should be understood that domestic regulation of real-world assets (RWA)-related business continues to tighten; compliance at the asset and issuance-structure levels should be completed first, and only then should the business narrative be presented.
Intermediaries, promoters and proxy investors
Those who know the underlying assets of an RWA project are false but still assist in promotion and receive commissions based on the scale of new users recruited may be at risk of being found to be accomplices.
It is advisable to retain three types of materials: asset ownership materials reviewed and commission transaction records; once a problem is discovered in a project, promotion must stop immediately, and records relating to cessation of business and disgorgement of illegal gains should be retained.
Investors should ask three questions before participating in an investment:
Who is the registered entity for the underlying assets, and can it be independently verified?
Into what account are the raised funds deposited, and is there any custody mechanism?
What assets ultimately support the advertised returns?
If none of these three questions can be answered effectively, what is at stake is not ordinary market volatility, but the risk of total loss of principal.
If the project collapses, promptly preserving the promotional materials, chat records, transfer records and on-chain evidence serves both as evidence for reporting to the authorities and as important support for subsequent recovery of assets and loss mitigation.
Lawyer's Observations
Real-world assets (RWA) change the form in which assets are expressed, but they do not change the legal analysis applied to illegal fundraising.
No matter how well designed an on-chain contract may be, it cannot avoid two underlying questions: Are the underlying assets genuine? Where do the raised funds ultimately flow?
Industry participants conducting business should also ask themselves these two questions in advance.
