Attorney Shao Shiwei | Can Fleeing Abroad or Changing Nationality Evade Criminal Sanctions?

Introduction:

Although China's 2021 Announcement No. 924 explicitly treats virtual currency-related business as "illegal financial activity," those who have made profits in the cryptocurrency field often find it difficult to leave the coin circle entirely. In particular, for the "coin circle tycoons" who have earned enormous wealth in the coin circle, they would rather choose to move overseas, or even change their nationality, than give up this field full of opportunities.

A couple of days ago, I saw a news report[i] that Zhang Yufa, the principal offender of the MBI Group, whose case involved more than RMB 100 billion, and the "godfather of Asian pyramid schemes," was successfully extradited back to China from Thailand. This case is the first economic crime suspect China has extradited from Thailand since the China-Thailand Extradition Treaty took effect in 1999.

As a criminal lawyer focusing on the Web3 field, I am no stranger to the virtual currency pyramid scheme case involving the MBI Group. I have previously written related analysis articles (→ "Virtual Currency Involving Pyramid Schemes: In What Circumstances Is It Not Guilty?"). Today I would like to talk about a question that Lawyer Shao is often asked in daily work—If the business one engages in violates the criminal law provisions of our country, can one evade legal pursuit by moving abroad or changing nationality?

Author of this article | Lawyer Shao Shiwei

To explain this issue comprehensively, we can further break it down into three small questions:

• If a foreign national commits a crime abroad, will they be arrested and brought back to China for trial?

• Can a Chinese national evade criminal legal accountability by fleeing abroad after committing a crime?

• Can a Chinese national evade criminal legal accountability by committing a crime abroad?

This again divides into two situations: one is an ethnic Chinese person who held foreign nationality at birth, and the other is a person who was originally of Chinese nationality and later acquired foreign nationality.

• MBI Group pyramid scheme case

Zhang Yufa, the principal offender of MBI Group mentioned at the beginning of this article, is widely reported online to be a third-generation Malaysian national of ethnic Chinese descent whose ancestral home is Guangdong (he falls within the first situation described above). According to reports, MBI Group was established in Malaysia in 2009. Since 2012, the company has set up the "MTC" game-based wealth-creation platform and the "MTI" online pyramid scheme platform on the internet. Through these two platforms, "MBI Group" developed a total of 11.05 million membership registrations within China, with downline levels reaching as many as 1,357.

In November 2020, the Chongqing police opened an investigation into Zhang Yufa in accordance with the law. In March of the following year, the China National Central Bureau of Interpol issued a "Red Notice" against him. Shortly thereafter, Thai police arrested Zhang Yufa. China subsequently submitted an extradition request to Thailand. On May 21, 2024, the Thai Court of Appeal issued a final ruling to extradite Zhang Yufa to China, and on August 14, the Thai government made an administrative decision supporting the court's ruling.

• Wanfu Coin online pyramid scheme case

Since 2014, Liu Ning, a Chinese national of US nationality, founded Future City USA in Los Angeles, United States. Under the name of selling virtual digital currency, the company carried out pyramid scheme fraud activities over the internet specifically targeting ethnic Chinese. In March 2016, Liu Ning also launched the virtual digital currency "Wanfu Coin" pyramid scheme project. By April 27, when the public security authorities uncovered it, in less than two months, the pyramid scheme project had recruited more than 130,000 members and frenziedly collected nearly RMB 2 billion in pyramid scheme funds. On November 7, 2018, the Intermediate People's Court of Changde City, Hunan Province, issued a second-instance judgment[ii], sentencing Liu Ning for the crime of organizing and leading pyramid scheme activities to ten years' imprisonment and a fine of RMB 10 million.

Under Article 9 of the Nationality Law of the People's Republic of China, a Chinese citizen who has settled abroad and who voluntarily joins or acquires foreign nationality automatically loses Chinese nationality. It can thus be seen that China does not recognize dual nationality.

However, in criminal cases, the situation is different: even if you have acquired foreign nationality, as long as you have not renounced Chinese nationality, the judicial authorities will still recognize your Chinese nationality. Therefore, the judgment in this case did not mention Liu Ning's US nationality at all, and described him only as a person from Cangzhou City, Hebei Province.

[Summary]

Given that China's criminal jurisdiction provides for the principles of territorial jurisdiction, personal jurisdiction, protective jurisdiction and universal jurisdiction, methods such as physically going abroad or changing nationality cannot circumvent the criminal law risks of China.

· Zhenjiang, Jiangsu police crack virtual currency pyramid scheme case

According to reports,[iii] in March 2021, the Dantu Branch of the Zhenjiang Municipal Public Security Bureau discovered that a certain virtual currency platform was suspected of online pyramid selling. The virtual tokens issued by the platform were listed on various types of virtual currency exchanges through various means, and were publicly promoted as having broad prospects, continuously attracting members to purchase them, while the project team earned high profits in the background by selling the original tokens. By the time the case was uncovered, the platform had cumulatively registered more than 100,000 members, and the amount involved exceeded RMB 100 million. The principal offender, Wang, fled overseas and had not been apprehended. In 2022, Wang was formally issued a Red Notice by Interpol for pursuit and arrest, and at the same time the Zhenjiang police continuously persuaded him to surrender through various means. Finally, in May 2023, under the police's persuasion, Wang returned from abroad and surrendered. In April 2024, Wang was formally sentenced.

In cases where the country or region to which the perpetrator has fled has not signed anextradition treaty(the act by which a state, pursuant to a treaty or on other grounds, transfers a person within its territory who is accused or convicted of a crime by another state to that state for trial or punishment at that state's request; a form of mutual legal assistance in criminal matters between states), persuasion to return is the method most used by Chinese law enforcement personnel. In this case, Wang returned to China through persuasion to return.

In the article "Can Chinese police arrest people across borders for telecom and online fraud committed abroad?", Lawyer Shao listed in detail that, with respect to fugitives who have violated Chinese law but are located abroad, the case-handling authorities mainly have the following methods：Extradition, repatriation, joint law enforcement, and persuasion to returnIn addition,prosecution in a foreignjurisdictionis also an important means of cooperation among international law enforcement agencies.

Prosecution in a foreign jurisdiction means that the competent authorities of China provide the judicial authorities of the country where a fugitive is hiding with evidence that the fugitive has committed a crime under that foreign country's laws, and the foreign judicial authorities, in accordance with their own laws, apprehend and prosecute the fugitive. For example, Yu Zhendong, Xu Chaofan, and Xu Guojun, the three former heads of the Kaiping Sub-branch of the Guangdong Branch of the Bank of China, fled with RMB 483 million to the United States after the case came to light in 2001.

Although China and the United States have not signed an extradition treaty, the Guangdong Provincial People's Procuratorate assisted the U.S. judicial authorities in apprehending Yu Zhendong locally and initiating criminal prosecution against him on charges including illegal entry, illegal immigration, and money laundering, and Yu Zhendong voluntarily accepted repatriation. Xu Chaofan and Xu Guojun, however, neither pleaded guilty nor accepted repatriation, and were sentenced by U.S. courts to 25 years and 22 years' imprisonment respectively, and remained in local prisons to serve their sentences.

[Summary]

When fleeing abroad, many people will first choose countries that have not signed extradition treaties with China, but this is not a foolproof strategy.Especially in economic crime cases involving the confiscation of huge amounts of property, law enforcement agencies of various countries will actively intervene, for example, the 2017 Lantian Gerui illegal absorption of public deposits case involving RMB 40 billion in China, which was connected to the largest Bitcoin money laundering case in the United Kingdom. The principal offender, Qian Zhimin, has been arrested in the United Kingdom, but can the investors in the Lantian Gerui illegal absorption of public deposits case in China recover their losses? It is hard to say.

No. This is easy to understand; let us discuss two cases that everyone knows.

• The pregnant woman pushed off a cliff in Thailand case

A couple from Jiangsu (the husband from Jiangyin and the wife from Nanjing) were traveling in Thailand when the husband pushed his wife, who was three months pregnant, off a cliff 34 meters high.

• The Jiang Ge case

In the early hours of November 3, 2016, Jiang Ge, a young woman pursuing postgraduate studies in Japan, was killed at the entrance of her rented residence; the perpetrator was Chen Shifeng, the boyfriend of Liu Xin.

What the above two cases have in common is that the criminal acts occurred abroad, and both the criminal suspects and the victims were Chinese nationals; therefore, China of course has jurisdiction. The difference is that China and Japan have not signed an extradition treaty, whereas China and Thailand have signed an extradition treaty.

Since the case occurred locally, from an evidentiary perspective, it is clearly more convenient for the local court to accept jurisdiction. If China insists on filing and investigating the case, this may not benefit the victim: the handling of a criminal case requires clear facts and sufficient and reliable evidence, yet the witnesses are abroad and the evidence is also abroad, and the cumbersome and complex notarization and authentication procedures for obtaining evidence abroad may mean that the case's completion deadline is indefinitely far off...

[Summary]

If a criminal case involves the crypto assets field, even if the actor is overseas, close attention should still be paid to the relevant provisions of Chinese law and the law of the country where the actor is located regarding their business activities. For example, with the blockchain game GameFi, doing this domestically carries a high risk of criminal liability, but if doing it abroad, attention should also be paid to the relevant laws and regulations of the country where the project is located or the regions where the project's users are located.

It is often said that the appeal of the crypto world lies in decentralization and being borderless. However, for criminal cases, the criminal justice systems of countries around the world also more or less bear the characteristics of "long-arm jurisdiction."

Therefore, as legal professionals, we have a responsibility to remind every citizen that, whether at home or abroad, they must respect the law and hold the rules in awe.