A sale of USDT was completed, the RMB was received, and the transaction appeared to be over.But a few days later, the bank card suddenly became unusable, and the bank informed the account holder that the account was involved in fraud-related funds and had been frozen by the public security authority.The seller was somewhat surprised: they had merely placed an order and traded in the ordinary course, knew neither the payer's upstream counterparty nor which accounts the money had passed through before, so how had they become connected to a fraud case?
What is more concerning is whether the freeze is only the beginning. Will the public security authority investigate the seller further? If the funds received from the coin sale are indeed fraud proceeds, does that constitute a money laundering offense?
Such questions are not uncommon in over-the-counter (OTC) trading of virtual assets.
But two issues must first be distinguished here: a finding that a sum of funds is connected to a fraud case does not mean the recipient necessarily participated in the fraud; and a frozen bank card does not mean the cardholder has already committed a money laundering offense.
What truly needs to be established is how the funds at issue entered the account, whether the seller knew or should have known of the criminal source of the funds, and whether the seller's trading conduct constituted assisting in the transfer or conversion of criminal proceeds.
01 Why is the bank card frozen when the coin sale received fraud-related funds?
To understand this issue, one must first look at how an ordinary OTC USDT transaction is completed.
The seller sells USDT on a trading platform or through other channels, and the buyer pays RMB by bank transfer. After confirming receipt of payment, the seller transfers the corresponding USDT to the buyer.
However, the actual payer, the counterparty on the platform, and the person who ultimately obtains the USDT are not necessarily the same person.
For example, the buyer may pay using a third-party account, or may require the seller to transfer the coins to a designated wallet address. If the RMB originated from prior telecom and online fraud, the seller's bank account may become a link in the chain of fraud-related fund flows.
When public security authorities investigate fraudulent funds, they trace the whereabouts of the funds downstream based on information such as bank statements and transfer relationships. Even if the account holder did not directly participate in the fraud, their account may still be subject to freeze measures because it received funds involved in the case.
It should be noted that a bank's restriction of transactions and a public security authority's freeze in accordance with the law are not entirely the same.A bank may restrict account functions based on abnormal transaction monitoring; a public security authority may, based on the needs of criminal investigation or anti-fraud handling, take corresponding measures against funds involved in a case.
Therefore, upon discovering that a bank card cannot be used, the first step is to verify the nature of the restrictive measure, rather than immediately concluding that one is suspected of a crime.
The inflow of funds into an account involved in a case indicates that the transaction may require investigation; whether criminal liability is borne still requires an independent determination.
02 Will it constitute the crime of money laundering? First look at what crime the money comes from
In everyday conversation, people often collectively refer to the use of bank cards and virtual assets to transfer illegal proceeds as "money laundering."
However, under criminal law, the crime of money laundering, the crime of concealing or disguising criminal proceeds and the proceeds thereof, and the crime of assisting information network criminal activities have different constitutive elements and cannot be conflated.
First, the crime of money laundering does not apply to all criminal proceeds.
Under Article 191 of the Criminal Law, the crime of money laundering targets seven categories of specific predicate offenses, including drug crimes, organized crimes of a mafia-like nature, terrorist activity crimes, smuggling crimes, embezzlement and bribery crimes, crimes of disrupting the order of financial administration, and financial fraud crimes.
The Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues Concerning the Application of Law in the Handling of Criminal Cases of Money Laundering, effective in August 2024, further clarifies that transferring or converting the proceeds of the above crimes and the gains derived therefrom through methods such as virtual asset transactions may constitute the relevant conduct prescribed for the crime of money laundering.
This means that virtual assets such as USDT may indeed become tools of money laundering crimes.
Conversely, however, the mere fact that a transaction involves USDT does not by itself establish the crime of money laundering.
For example, common telecommunications and online fraud does not automatically constitute the financial fraud crime provided for in Article 191 of the Criminal Law. Whether the crime of money laundering applies requires first determining the specific nature of the predicate offense, and then examining whether the actor had the corresponding subjective knowledge and whether the actor carried out acts to conceal or disguise the source and nature of the criminal proceeds.
Second, the more common criminal dispute may be the crime of concealing or disguising criminal proceeds.
Article 312 of the Criminal Law governs situations in which a person, knowing that property is criminal proceeds and the gains derived therefrom, still carries out acts of concealment or disguise.
The judicial interpretation issued by the Supreme People's Court and the Supreme People's Procuratorate, effective from August 26, 2025, clarifies that methods of concealing or disguising criminal proceeds may include providing fund accounts, converting the form of property, and transferring funds through bank transfers or other payment and settlement methods.
In virtual currency transactions, if the actor knows that what is received is criminal proceeds such as from fraud, and still assists the other party in transferring funds by receiving payment, exchanging coins, or transferring coins, the actor may face criminal risk of the crime of concealing or disguising criminal proceeds.
In a typical case published by the Supreme People's Court in 2025, several actors, following the instructions of a criminal gang, used bank cards to receive fraud funds, then purchased virtual currency through trading platforms and transferred it to designated accounts, obtaining remuneration in the process. The court, based on evidence such as chat records and the manner of fund transfer, determined that the actors concerned constituted the crime of concealing or disguising criminal proceeds.
It is worth noting that the basis for conviction in the case was not simply the use of a virtual currency trading platform, but rather that the actors, knowing they were handling criminal proceeds, still participated in the conversion and transfer of funds.
Third, providing assistance such as accounts may also involve the crime of assisting information network criminal activities.
The crime of assisting information network criminal activities provided for in Article 287-2 of the Criminal Law mainly governs situations in which a person, knowing that another person is using an information network to commit a crime, still provides assistance such as payment and settlement, where the circumstances are serious.
Distinguishing the crime of assisting information network criminal activities from the crime of concealing or disguising criminal proceeds requires not only examining whether a bank card was provided, but also analyzing what the actor knew, what assistance the actor provided, and what role the actor's conduct played in the chain of the predicate offense.
Therefore, after selling USDT and receiving fraud-related funds, the possible charges are not limited to one, but it is also by no means the case that merely because fraud-related funds were received, one must bear some form of criminal liability.
03 If you did not know the money was criminal proceeds, why might you still be investigated?
In criminal cases involving OTC transactions, “knowledge” is often the most important issue and also the one most prone to dispute.
Many crypto sellers say they merely collected payment and released the coins according to orders on the trading platform, did not participate in fraud, and never had direct contact with any fraud group.
These circumstances certainly need to be investigated, but a bare statement that “I did not know” is usually not enough to establish all the facts.
The 2025 judicial interpretation on the crime of concealing or disguising criminal proceeds makes clear that “knowledge” under Article 312 of the Criminal Law includes actual knowledge or constructive knowledge, and that a determination requires a comprehensive assessment of factors such as the circumstances of the funds handled, abnormalities in the transaction and the account, the method of transfer, and the actor’s professional experience.
In the context of USDT transactions, the following categories of circumstances merit particular attention.
First, whether the transaction price is obviously abnormal.
If the transaction price deviates significantly from market conditions, or the counterparty promises unreasonably high returns, this may prompt further scrutiny of the authenticity of the transaction, the source of the funds, and the purpose of the transaction.
However, an abnormal price can only serve as one factor in the assessment; a single quote that deviates from market conditions is not sufficient by itself to find that the actor knew the funds were proceeds of crime.
Second, whether the payer and the counterparty are the same person.
Where the seller negotiates a transaction with one account but the actual payment comes from multiple unfamiliar bank accounts, or the buyer frequently requests changes to the collection or payment method, these circumstances all require further explanation.
In particular, where the counterparty cannot reasonably explain the reason for a third-party payment, the relevant abnormalities may become one piece of evidence for determining whether the actor recognized the risks associated with the funds.
Third, whether the transaction method exhibits obvious characteristics of fund transfer.
For example, frequently receiving payments from different sources and then rapidly transferring them to designated addresses according to another person's instructions; not concerning oneself with the counterparty or the genuine transaction needs, but merely completing receipt, exchange, and transfer of funds as instructed; or continuing to assist fund flows in a similar manner even after abnormalities such as fraud-related alerts or freezes have appeared on the account.
These behaviors differ from ordinary asset purchases and sales in ways that require further examination.
Fourth, whether the trader responded to abnormal circumstances.
If the person received clear risk warnings during the transaction, or the counterparty disclosed in chat that the source of funds was abnormal, and the person nevertheless continued to carry out the relevant transactions, their subjective awareness may be subject to stricter scrutiny.
However, regardless of which of the above circumstances arises, none can be judged in isolation from all the evidence.
In criminal cases, a comprehensive determination should be made in light of chat records, transaction orders, fund flows, on-chain transfer records, and the person's specific awareness.
Abnormal transactions do not equal criminal knowledge, and a trader's claim of ignorance cannot replace evidentiary review.
04 Once a card has been frozen, what facts are most important to ascertain?
For coin sellers whose cards have been frozen, the immediate priority is often to restore use of the account.
However, if the freeze is connected to a criminal case, merely demanding that the bank unfreeze the account may not truly resolve the problem.
More importantly, it is necessary to ascertain the source of the account restriction and to form relatively complete evidentiary materials centered on the specific transaction.
First, confirm who imposed the account restriction measure.
The current status of the account can be verified through official bank channels: whether it is the bank's own risk control, an anti-fraud restriction, or a freeze measure imposed by a public security authority.
If it is a freeze imposed by a public security authority, the handling unit, contact information, relevant freeze information, and the procedures for subsequently submitting materials should be verified as far as possible.
Different measures correspond to different ways of handling, and not all account anomalies should be treated as the same kind of "card freeze."
Second, organize the complete process of the transaction at issue.
Many people only have bank receipt records in hand and believe that since the money did indeed arrive, the transaction is genuine.
However, in a criminal investigation, bank records generally can only prove how funds entered the account; they cannot by themselves prove the corresponding USDT transaction process, and still less can they directly prove that the source of the funds is lawful.
Therefore, depending on the actual circumstances, it is necessary to retain the trading platform order, the communication records between buyer and seller, the payment account information, the process by which the transaction price was formed, the on-chain transaction hash, the wallet address, and the asset delivery records.
If off-platform over-the-counter trading was used, materials concerning how the parties established contact, how the transaction terms were agreed, and how payment and asset delivery were confirmed should also be preserved as far as possible.
This evidence should be mutually consistent and help reconstruct the true relationship among the funds, the order, and the on-chain assets.
Third, distinguish transaction payments from other funds.
A single bank account may simultaneously contain salary, business income, family transfers, and virtual currency transaction payments.
If the entire account is frozen, it is necessary to sort out the sources and uses of the different funds and the degree of their connection to the transactions at issue, rather than simply treating all of the account's transaction records as the amount involved in the case.
However, being able to show that other funds have an independent source does not mean that the relevant payments can necessarily be unfrozen immediately. Whether they constitute property involved in the case and whether preservation measures need to continue should be reviewed by the competent authorities in accordance with the law.
Under Article 247 of the Provisions on the Procedures for Handling Criminal Cases by Public Security Organs, where frozen property is verified to be genuinely unrelated to the case, the financial institution and other entities shall be notified within three days to lift the freeze, and the property owner shall also be notified.
The "three days" here is premised on the property having already been verified to be genuinely unrelated to the case; it does not mean that the freeze will necessarily be lifted within three days after an application for unfreezing is submitted.
If freeze measures are taken against property unrelated to the case, or if a freeze that should be lifted in accordance with the law is not lifted, the interested parties concerned may also file petitions and complaints in accordance with the law pursuant to Article 117 of the Criminal Procedure Law.
05 To get the freeze lifted as soon as possible, there are some things that should not be rushed
After encountering a frozen card, some users are eager to contact the counterparty to demand that the money be returned, or pay fees to persons who claim they can handle frozen cards.
The problem, however, is that account restrictions may involve criminal investigation, recovery of funds involved in the case, and the interests of multiple rights holders, and may not necessarily be resolved through private negotiation.
First, do not dispose of funds that may be involved in the case without authorization.
If the relevant funds have not yet been frozen, they must not be transferred, dispersed, or concealed on one's own initiative out of concern about subsequent investigation.
With respect to property that has already been frozen, the relevant legal procedures should be followed all the more.
If a refund, compensation, or other handling is required, the relationship between the recipient and the actual rights holder of the funds should first be ascertained, and where necessary the matter should be handled in accordance with the law through the case-handling authorities and professional lawyers, so as to avoid new disputes over ownership.
Second, do not delete chat records or fabricate transaction materials.
The fact that the counterparty's identity was not verified and complete order records were not preserved at the time of the transaction does not mean that the matter can later be remedied by altering chat records, backdating sham agreements, or similar means.
Such conduct may not only affect the authenticity of existing evidence, but may also expose the matter to greater legal risk in any subsequent investigation.
The proper approach is to preserve the original data, truthfully explain any missing evidence, and apply through lawful channels such as banks and trading platforms to obtain materials that can be verified.
Third, do not readily trust paid unfreezing services or paid assistance with withdrawals.
If someone claims to know the case-handling personnel and says that payment of a certain fee will result in immediate unfreezing, or asks the cardholder to cooperate by transferring funds or making cash withdrawals in order to resolve the matter, you should remain vigilant.
Freezing measures in criminal investigations must be handled in accordance with the law, and there is no so-called "guaranteed unfreezing" method that can bypass the procedures.
Fourth, do not focus solely on unfreezing while ignoring your own criminal-law risk.
If the relevant authorities not only require an explanation of the transaction but also begin investigating how the account was used, the source of the funds, and the relationships with counterparties, or ask whether you transferred funds or exchanged currency at another person's direction, it is necessary to carefully assess the criminal liability you may face.
At this point, you should cooperate truthfully with the investigation and, where necessary, promptly seek the assistance of a criminal defense lawyer, distinguishing among the different statuses of a person merely connected to the funds involved, a witness, and a criminal suspect, and the procedural rights corresponding to each.
06 What a coin seller most needs to prove is not merely that "I delivered the coins"
For persons whose bank cards were frozen after receiving fraud-related funds from selling USDT, a common explanation is: I did deliver the USDT, the transaction genuinely occurred, and therefore I have not committed any illegal or criminal act.
However, from a criminal law perspective, genuine transaction records can prove that an asset exchange occurred, but they are not necessarily sufficient to exclude all criminal risk.
This is because criminal proceeds may also be used in genuine sale and purchase transactions.
If the actor knows that the counterparty is using the transaction to transfer criminal proceeds, then even if USDT was actually delivered on-chain, this does not automatically exclude the possibility of offenses such as concealing or disguising criminal proceeds.
Conversely, if the trader genuinely did not know the criminal origin of the upstream funds and did not carry out any assisting act satisfying the elements of the relevant offense, the mere fact that the trader received fraud-related funds cannot be used to presume that the trader committed an offense.
A further issue must also be distinguished here:Criminal liability and the regulatory compliance of virtual asset trading activity itself are not the same thing.
China's current regulatory policy adopts a strict restrictive stance toward virtual currency exchange, trading matching and other related business activities. Even if a particular coin sale does not constitute the crime of money laundering or the crime of concealment, it does not follow that the corresponding trading activity necessarily meets regulatory requirements, or that the relevant civil rights and interests will necessarily receive full protection.
Therefore, when handling such issues, one cannot look only at whether the transaction was genuine, nor only at the fund flow records of the transaction, and still less can one equate an account freeze directly with the establishment of a crime.
For transactions that have already occurred, the focus should be on fully reconstructing the facts:where the funds came from, why they entered the account, to whom the USDT was delivered, and what the trader knew at the time and what acts the trader carried out.
If these key questions are not clearly established, and the only response is to repeatedly ask when the freeze will be lifted, the legal risks faced may not be genuinely resolved.
Receiving fraud-related funds from selling USDT does not mean that the seller necessarily commits a money laundering offense; but a transaction that appears complete does not necessarily prove that all risks are absent.
After a bank card is frozen, what matters more than rushing to prove that one was “merely engaging in normal transactions” is using authentic, complete, and mutually corroborating evidence to reconstruct the transaction process and to determine, in accordance with the law, the boundary between the fund risk and one’s own liability.
