Special Disclaimer: This article is an original work by Attorney Shao Shiwei. It represents only the personal views of the author and does not constitute legal consultation or legal advice on specific matters. For article reposting, legal consultation, or business exchanges, please add: sswls66

 

Introduction:

Friends often ask whether it is still permissible to buy and sell USDT, and whether trading cryptocurrencies is illegal. Today, we will discuss this issue through several vivid cases (with certain details redacted to protect client privacy).

 

Author: Attorney Shao Shiwei

01

Case 1: Assisting a Friend in Selling USDT, Convicted of the Crime of Concealing or Disguising the Proceeds of Crime

One day, B, residing in Location A, was summoned for questioning by the police in coastal Location B. After arriving in Location B, B was held at the local police station for 24 hours, and was subsequently charged with the crime of concealing or disguising the proceeds of crime. B is currently released on bail pending trial.
B asked me why assisting a friend in selling USDT constituted a crime. I asked B to explain the full context of the matter.
                                                                                                                                                                                                  (The relationships between the parties and the transaction flows are illustrated in the figure)
B’s friend A operated a company with overseas clients. Each time a client made a payment, they transferred Tether (USDT) to A. A would then contact B to convert the USDT into RMB, charging a service fee of 0.1%.
Additionally, A had a regular collaborator, C, who introduced many buyers seeking to purchase USDT to A.
One day, C contacted A, stating that he had introduced a buyer (D) interested in purchasing USDT. Consequently, A instructed B to coordinate with C. D transferred RMB 200,000 to B’s personal bank account. Upon confirming receipt, A transferred USDT equivalent to RMB 200,000 to the address specified by C for buyer D. After deducting his service fee, B transferred the remaining amount to A.
A few weeks later, B was investigated by the public security authorities in his place of residence (Location A), who stated that buyer D from the previous transaction had reported being defrauded of RMB 500,000, hence summoning B for questioning. At this point, B also discovered that RMB 200,000 in his bank account had been frozen by the police in Location B. After understanding the situation, the public security authorities in Location A informed B that he was not involved and advised him to go to Location B to unfreeze his bank account.
However, upon arriving in Location B, the police asked, “Did you also engage in USDT transactions worth RMB 300,000 with XX Company? XX Company is D’s company, and D was defrauded of a total of RMB 500,000.”
B acknowledged the existence of these two transactions, stating that he was merely assisting his friend A in selling USDT and coordinated solely with C. He claimed unawareness of any connection between D and XX Company. However, he argued that he received RMB 500,000, and his friend A provided the corresponding amount of USDT, offering to provide evidence of the entire transaction chain.
The police in Location B stated: “In short, D has reported being defrauded. Since you engaged in transactions with D and XX Company, you are now suspected of the crime of concealing or disguising the proceeds of crime, and you must provide restitution to the victim.”

 

[Attorney Shao’s Analysis]

It is indeed absurd that B was charged with the crime of concealing or disguising the proceeds of crime.
Based on similar situations B encountered previously, it is likely that issues arose in transactions between the buyer and third parties after A transferred the USDT to the buyer.
To date, more than half a year has passed. Although B provided the contact information of A and C to the police in Location B, the police have not contacted them. B was questioned by the police in Location B only once. Logically, without questioning A and C, the matter cannot be thoroughly investigated, as B merely acted as a conduit for A. Moreover, A’s conduct may already constitute the illegal buying and selling of foreign exchange.
Most importantly, after completing this transaction, D transferred the USDT to others, resulting in D being defrauded. What does this have to do with B? Why should B be required to provide restitution?

02

Case 2: I Am a USDT Merchant Engaging in Normal Sales, Yet the Police Require Me to Refund the Received Funds to the Victim

The similarity between this case and the previous one lies in the issue of restitution.

The client was a legitimate USDT merchant (A) who had been engaged in the business of buying and selling USDT for several years. One day, an old friend B approached A again to purchase USDT. Due to the trust established through multiple prior transactions, A directly transferred the USDT to the address provided by B and subsequently received the corresponding RMB payment.

This should have concluded a pleasant and successful transaction. However, A’s bank account was frozen. Upon contacting the police in the jurisdiction where the freeze occurred, the police stated that C had been defrauded, and A must refund the exact amount previously received; otherwise, the bank account would not be unfrozen.

It transpired that in the transaction between A and B, B had designated C to transfer funds to A.

 

[Attorney Shao’s Analysis]

Another absurdity. This matter clearly involves B, yet the local police focused solely on A. What kind of handling is this?

Furthermore, the solution proposed by the police to A was to refund the money to C and then sue B to recover the USDT (a proposal that leaves one bewildered).

03

Case 3: My Boss Sells USDT and Asked Me to Supervise Customer Payments Offline. What Are the Risks?

This question came from a workplace novice. He stated that he was recently job hunting, and the “boss” interviewing him said that their team sourced customers looking to buy USDT online. Some customers requested offline transactions. The novice’s job responsibilities included meeting customers face-to-face offline to communicate and supervise the receipt of funds. If the customer paid into the boss’s account, the novice would transfer the USDT to the customer.

He asked me if this job carried any risks.

 

[Attorney Shao’s Analysis]

As long as there is profit to be made, regardless of the magnitude, people will engage in such activities on a large scale. The USDT merchant business is no exception. Therefore, it is not surprising for workplace newcomers to encounter such job opportunities.

Why do customers request offline transactions? Some customers feel that transferring money without guaranteed receipt of USDT lacks security, believing that having the seller present provides greater assurance. However, offline transactions often involve more abnormal circumstances. Using common sense, trading on exchanges is far more convenient, and exchanges have already implemented Know Your Customer (KYC) procedures for platform entities. So why do these individuals insist on offline transactions? Either

they intend to launder money without leaving a trace, or they aim to defraud you of your USDT. If a buyer brings a large amount of cash, what if it is counterfeit? Or, what if they rob you of the money immediately after you transfer the USDT? (These are real incidents encountered by Attorney Shao...)

These individuals are confident that if you report the incident to the police station, it will likely be ignored. If you tell the police, “I was defrauded while buying USDT,” the police may ask, “What is USDT?” or “How can you prove that your USDT is worth that much?” (Although it is generally known that the value of USDT is pegged to the US Dollar 💵, law enforcement proceedings require reports issued by authoritative appraisal institutions to establish the value of USDT as

evidence.

General Knowledge: Certain domestic institutions can appraise the value of virtual currencies, typically upon commission by public security authorities. Appraisal reports commissioned by individuals may not necessarily be accepted by judicial organs. In short, while being defrauded is easy, seeking legal recourse is difficult).

Fellow USDT merchants, have you encountered any other bizarre incidents?

 

 

Recommended Reading

Earning Spreads by Buying and Selling USDT: Why Was the USDT Merchant Convicted of the Crime of Concealing or Disguising the Proceeds of Crime?

The Transactions ‘Visible’ to USDT Merchants Are Merely the Tip of the Iceberg—What Is the Relationship Between Earning Spreads by Trading USDT Virtual Currency and Disguised Foreign Exchange Trading?

Is Buying and Selling USDT Illegal? Lawyer’s Interpretation: Joint Release of Criminal Cases Involving Virtual Currencies by the Supreme People’s Procuratorate and the State Administration of Foreign Exchange

The State Administration of Foreign Exchange Takes Action! An Increasing Number of USDT Merchants May Be Charged with the Crime of Illegal Business Operations—Qingdao Police Solve Underground Banking Case Involving RMB 15.8 Billion

Has the Crime of Illegal Business Operations Become a High-Frequency Criminal Charge for USDT Merchants in the Crypto Circle?

Defrauded in USDT Transfer: How to Recover USDT Worth RMB 40 Million?

Arrested for Earning Spreads by Buying and Selling Tether (USDT): How to Conduct Effective Criminal Defense? — Criminal Risks for OTC Merchants: The Crime of Illegal Business Operations (II)

What Legal Risks Should Be Considered for Paid Virtual Currency Communities?

Will Taxes Be Levied on Virtual Currency Trading? — Interpretation of Document Issued by Shanghai Municipal Tax Service

Do Not Introduce Others to Buy or Sell Foreign Exchange, Beware of Being Charged with the Crime of Illegal Business Operations! — Acquaintance Introduces Currency Exchange, ‘Intermediary’ Charged as Principal Offender and Sentenced to 8 Years: Is It Unjust? (Part II)

Acquaintance Introduces Currency Exchange, ‘Intermediary’ Charged as Principal Offender and Sentenced to 8 Years: Is It Unjust? — Do Not Introduce Others to Buy or Sell Foreign Exchange, Beware of Being Charged with the Crime of Illegal Business Operations! (Part I)

Court’s Viewpoint: Transferring Virtual Currency to Another Party Constitutes an Illegal Debt! Do Not Expect Repayment! — Lawyer’s Advice: How to Recover the Money?

Earning RMB 100,000 Monthly Through USDT Arbitrage? You Will Receive a Pair of Silver Bracelets! — Criminal Risks for OTC Merchants: The Crime of Illegal Business Operations (I)

Is Buying and Selling Tether (USDT) Illegal? These Days, Being a USDT Merchant Is Extremely Difficult!