Special Disclaimer: This article is an original work by Attorney Shao Shiwei and reflects only the author’s personal views. It does not constitute legal advice or a legal opinion on any specific matter. For article reprints, legal consultations, or business exchanges, please add: sswls66
Introduction:
Recently, Chinese Prosecutors magazine published an article titled “Precise Analysis of Complex Cases: Judicial Determination of Money Laundering Involving Virtual Currencies,” which discusses a case handled by the Changning District People’s Procuratorate in Shanghai involving aUSDT merchantwho committed the crime ofconcealing or disguising the proceeds of crime. The defendant, Xiao Mou,obtained illicit gains of RMB 6,000and was sentenced tothree years and three months of fixed-term imprisonment。
With respect to criminal cases involving USDT merchants trading virtual currencies, Attorney Shao has previously authored multiple articles providing jurisprudential analysis (please click the links at the end of this article to read).
Today, we will discuss more practical issues, which are also the legal inquiries most frequently posed to Attorney Shao in his daily practice.
(Image source: X, Telegram)
01
Nowadays, even pregnant women have taken on part-time work as USDT merchants to earn spreads.
Perhaps due to Attorney Shao’s long-term handling of crypto-related cases, I have the impression that the number of USDT merchants is increasing.
Before the Lunar New Year, Attorney Shao’s team handled a case in which a USDT merchant (hereinafter referred to as “Xiao Mei”) was suspected of committing the crime of aiding information network criminal activities and is currently released on bail pending trial. When asked why she became a USDT merchant, Xiao Mei explained that she became pregnant last year and, having little to do at home, learned from online information that trading USDT could generate profits from price spreads.
Consequently, she took on part-time work as a USDT merchant, hoping to supplement her household income. Although the transactions were conducted on a large, compliant virtual asset exchange, she still received proceeds derived from criminal activities.
Another indicator suggesting the growing population of USDT merchants is the apparent increase in individuals operating in ancillary industries. In plain language, there are increasingly more schemes aimed at exploiting USDT merchants.
You wish to become a USDT merchant, but there is a certain threshold. Do you know how to use digital wallets? How to engage in arbitrage across different exchanges to maximize profits? How to conduct KYC reviews of customers? How to avoid receiving tainted USDT? How to respond to law enforcement if your bank card is frozen? You are unfamiliar with these issues, correct? I am offering training on becoming a USDT merchant.
The course fee is only XXXXX yuan. Are you interested? It can perfectly resolve all obstacles you encounter in the process of buying and selling USDT. Is this not highly cost-effective?Providing training is an excellent business; the most profitable venture is teaching others how to make money.。
Are USDT merchants not afraid of being defrauded during transactions? What if I transfer crypto assets to you, but you fail to pay me? Some individuals have identified a business opportunity in this concern by offering USDT merchant escrow services (somewhat similar to platforms such as Alipay or Xianyu). If the two transacting parties do not trust each other, they may place their trust in me.
You both transfer your funds and USDT to me; I deduct a handling fee from each side as compensation for my escrow services, and then I remit the respective amounts to both parties. This approach effectively resolves your trust deficit.Earning profits from both sides with minimal capital outlay—this business model appears highly attractive.。
I have often remarked that operating as a USDT merchant is exceedingly difficult: earning meager profits while bearing substantial risks, engaging in arbitrage with margins of 0.1% or even lower, and constantly guarding against the risk of receiving illicit funds, all while being targeted by numerous actors seeking to exploit them. Having bank cards frozen may be manageable; our
team has successfully handled multiple cases involving the unfreezing of bank accounts. However, once criminal liability is implicated and personal liberty is restricted, the complications become significantly more severe.
02
If under investigation by public security authorities, can one assert innocence?
This reflects a common layperson’s perspective. Whether it is the person under investigation or their relatives, the primary question posed when first consulting a lawyer upon being investigated by public security authorities is: “I was merely trading USDT to earn the spread; I genuinely did not know that I received illicit USDT. Can I assert innocence?” As a criminal defense attorney,
I fully understand such inquiries. However, does it suffice to simply state, “I was subjectively unaware of the other party’s illegal or criminal conduct,” when under investigation by public security authorities? Certainly not.
The core criterion for determining whether conduct constitutes a criminal offense lies in assessing the actor’s degree of subjective knowledge.。
Taking as an example the case prosecuted by the Changning District People’s Procuratorate, mentioned at the beginning of this article, in which Mr. Xiao, a USDT merchant, was convicted of the crime of concealing or disguising the proceeds of crime, we illustrate the judicial determination of “subjective knowledge” regarding the counterparty’s illegal or criminal conduct.
The facts can be summarized as follows: Mr. Xiao purchased USDT and resold it to others. The RMB payments he received from the buyers were proceeds derived from illegal payment-settlement schemes. Mr. Xiao was convicted of the crime of concealing or disguising the proceeds of crime.
Attorney Shao’s analysis:
Was Xiao fully aware of the specific nature and source of the funds obtained by upstream parties? I believe he was certainly unaware, as his role was limited to selling USDT and conducting his own transactions.
Therefore, does the crime of concealing or disguising the proceeds of crime require the perpetrator to be fully aware of the specific nature and source of the funds obtained by upstream parties? It does not. It is sufficient that the perpetrator knows the upstream funds are illicit proceeds.
Of course, no defendant would voluntarily state during interrogation, “I knew the other party’s funds were illicit proceeds! My transactions were intended to help the other party transfer illicit proceeds!” In such cases, it is necessary to infer the perpetrator’s subjective knowledge by considering a multitude of evidence. For example, in this case:
1. Concealed method of transaction. The parties did not use domestic messaging applications such as WeChat or QQ, but instead used Telegram (also known as “Paper Plane” or “Telegraph”), a foreign messaging application with strong anti-investigation features such as self-destructing messages.
2. Abnormal transaction pattern. The parties did not transact on exchanges, but conducted offline transactions at locations deliberately chosen to avoid surveillance, such as restrooms and vehicles. In addition, the upstream participants wore masks and hats to conceal their identities during the transactions.
3. Presence of a “card testing” step and abnormal profits. Each time, the upstream party required Xiao to transfer virtual assets equivalent to RMB 100 to their wallet address. The transaction price was significantly higher than the highest trading price on the platform for that day, making the upstream party’s conduct ostensibly a loss-making transaction.
Considering the above behaviors collectively, it is difficult to argue that Xiao was unaware of the irregularities surrounding the other party’s funds.
03
If an acquittal is not possible, how can one seek a lighter sentence?
The maximum sentence for the crime of aiding information network criminal activities is three years’ imprisonment, whereas the maximum sentence for the crime of concealing or disguising the proceeds of crime is seven years’ imprisonment.The application of different charges has a significant impact on the defendant. From a jurisprudential perspective, the crime of concealing or disguising the proceeds of crime requires knowledge that the upstream funds are criminal proceeds and the gains derived therefrom, whereas the knowledge required for the crime of aiding information network criminal activities is limited to knowing that others are using information networks
to commit crimes.
However, in judicial practice, the distinction between whether a perpetrator has committed the crime of aiding information network criminal activities or the crime of concealing or disguising the proceeds of crime is not entirely clear. As analyzed in my previous article, “Can a conviction for the crime of concealing or disguising criminal proceeds be recharacterized as the crime of aiding information network criminal activities? Which carries a lighter sentence?As stated inthe phenomenon of inconsistent judgments in similar cases has long persisted.
How to seek a lighter sentence? The prerequisite is to have an accurate understanding of the concepts and legal characterization of the two offenses. For reference, see Attorney Shao’s article “A Comprehensive Overview: Potential Criminal Charges for Providing Accounts to Facilitate Transfers on Behalf of Others,” which provides a detailed analysis.
In specific cases, an accurate determination requires an analysis of the specific constituent elements of each offense in light of the factual circumstances of the case.
Concluding Remarks
As Attorney Shao often remarks to clients seeking consultation, the transactions perceived by USDT merchants represent only the tip of the iceberg.
Recommended Reading
Is Over-the-Counter (OTC) Trading of Digital Currencies a Crime?
Defrauded in a USDT Transfer: How to Recover USDT Worth RMB 40 Million?
