Introduction
A lead trader calls orders in a group chat, telling members to follow him in futures contracts and promising principal protection and high returns; an acquaintance claims to have inside information and asks the person to transfer money for him to invest and trade on his behalf; the account balance shown on a platform's page keeps rising, but when it comes time to withdraw, the page will not open, customer service cannot be reached, and the withdrawal channel is closed.
In these three scenarios, the parties involved usually hold the same few items: transfer records, chat screenshots, and account balance pages. Yet when they take these items to report to the police, the responses they receive may be completely opposite: some walk away with an acceptance receipt on the spot, while others are persuaded to go home on the ground that this is an investment dispute and cannot be docketed.
So when money is lost in virtual assets, in what circumstances does it count as fraud, and in what circumstances can the loss only be borne by the investor?
I. First, distinguish which type of loss it is
(1) Losses caused by market fluctuations
The price of virtual assets is determined by the market; there are no price limits and no central counterparty, meaning no institution will backstop the execution and performance of trades. Buying and selling are decided by investors themselves, and the shrinkage of an account caused by a market decline is the result of trading itself. In such a case, even if the loss is very large, there is only a harmful result and no actor who committed deception; this is often the first category that public security authorities rule out at the preliminary inquiry stage.
(2) Losses caused by deception
In the other scenario, the money was not lost; from the very beginning it was never where it was claimed to be. The platform is fabricated, the market data is altered in the backend, the so-called quantitative strategy does not exist, and the investors' funds enter personal accounts or accounts completely unrelated to the claimed use.
In such cases, there is no connection between market movements and the loss; the loss results from the other party's conduct.
(3) Scenarios where both factors are intertwined
The hardest to handle are platforms that mix genuine and false elements: the platform genuinely exists and did conduct trading for a period of time, but the operator simultaneously fabricated part of the trading data, misappropriated client funds, or continued to absorb funds while knowing it could not make payment.
In such a case, the losses need to be broken down and calculated separately: which portion arises from market movements and which portion arises from deceptive conduct. If the accounts are calculated on an aggregate basis, neither portion can be clearly explained.
II. To determine whether this is fraud, three verifiable facts need to be examined
Objectively, the crime of fraud requires the perpetrator to fabricate facts or conceal the truth, causing the victim to fall into a mistaken understanding and dispose of property on that basis; subjectively, it requires the perpetrator to have the purpose of illegal possession, that is, from the outset not intending to repay or not intending to honor payment:
(1) Whether the other party fabricated facts or concealed the truth
This is the easiest of the three facts to verify, because it rests on documentary materials rather than on statements.
1. Whether the platform itself is genuine.It is necessary to examine whether the transactions actually occurred, whether the deposit addresses are controlled by the platform, and whether the interface and functions of the same platform are consistent across different users; fake platforms usually share a common feature: the deposit and withdrawal channels are completely separate from the purported matched trading, and from the moment the funds entered, they never participated in any transaction.
2. Whether the market data and figures are genuine.If the account balance, rate of return and position details cannot be matched against public on-chain data or market data, there is a possibility that they have been modified through the back end; the pattern of rebates is also an observation point: early small rebates arrive on time, and after the investment is increased, withdrawals begin to be restricted. This change itself can indicate the problem.
3. Whether the identity and qualifications are genuine.The real name, affiliated institution and professional qualifications of the teacher providing trading signals, as well as the platform's operating entity, place of registration and filing status, can all be verified one by one; under the current regulatory framework for virtual currency-related business activities, no entity can possibly hold a qualification to lawfully conduct such business, and any claim to hold a license, have obtained regulatory approval or have state-owned background is itself a fact to be verified.
(2) Whether the other party had the purpose of illegal possession
The intent to illegally possess is a subjective state that no one will readily admit, and it can only be inferred from objective conduct.
If the report points tothe crime of fund-raising fraud, Article 192 of the Criminal Law requires the use of fraudulent methods to illegally raise funds for the purpose of illegal possession; Article 7, paragraph 2 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fund-Raising (2022 Amendment) (Fa Shi [2022] No. 5) provides for eight circumstances in which the purpose of illegal possession may be found, including: failing to use the raised funds for production and business activities after fund-raising, or using them for production and business activities in a manner clearly disproportionate to the scale of the funds raised, such that the raised funds cannot be returned; squandering the raised funds; absconding with the raised funds; using the raised funds for illegal or criminal activities; withdrawing or transferring funds or concealing property to evade returning the funds; concealing or destroying account books, or feigning bankruptcy or closure to evade returning the funds; and refusing to disclose the whereabouts of the funds to evade returning the funds, among others.
If the report points tothe crime of fraud, reference may be made to the Minutes of the National Symposium on the Trial of Financial Criminal Cases (Fa [2001] No. 8). These Minutes address financial fraud crimes and enumerate seven circumstances in which the purpose of illegal possession may be found: knowingly lacking the ability to repay while obtaining a large amount of funds by fraud; absconding after illegally obtaining funds; squandering fraudulently obtained funds; using fraudulently obtained funds to engage in illegal or criminal activities; withdrawing or transferring funds or concealing property to evade returning the funds; concealing or destroying account books, or feigning bankruptcy or closure to evade returning the funds; and other acts of illegally possessing funds and refusing to return them. The approach to finding ordinary fraud is consistent with this, but it should also be noted that the original object of application of these Minutes is financial fraud crimes.
Immediately following the enumeration of circumstances of illegal possession is the sentence: [where there is evidence proving that the actor does not have the purpose of illegal possession, punishment as a financial fraud crime may not be imposed merely on the ground that the property cannot be returned]. This sentence is the fallback line of defense in this type of case, and it also explains why a considerable number of reports are stopped before case filing: not because the money has not been repaid, but because there is no evidence pointing to an unwillingness to repay.
(3) Whether there is a causal chain between the losses and the deceptive conduct
The other party's fabrication of facts and concealment of the truth must be the direct cause of the victim's decision to invest funds, and the losses must be the result caused by that false statement.
There are two situations here: 1. The victim already knew that the platform was unqualified and that market risks were borne by the victim, and what the victim valued when investing was the returns brought by high leverage, and only afterwards claimed to have been deceived; 2. The losses mainly occurred during a period of severe market fluctuations, and the shrinkage of the account had no corresponding relationship with the other party's conduct.
In these two situations, the conduct of fabricating facts may indeed exist, but the losses cannot be attributed to it, and it is possible that the constitutive elements of the crime of fraud are not satisfied.
III. Why, for the Same Report, Some Cases Are Accepted and Others Are Not
Article 112 of the Criminal Procedure Law provides that where a people's court, people's procuratorate or public security organ receives materials relating to a report, accusation, tip-off or voluntary surrender, it shall promptly examine them within the scope of its jurisdiction; where it considers that there are facts of a crime and criminal responsibility needs to be pursued, it shall file the case; where it considers that there are no facts of a crime, or that the facts of a crime are obviously minor and criminal responsibility does not need to be pursued, it shall not file the case, and shall notify the accuser of the reasons for not filing the case; if the accuser disagrees, the accuser may apply for reconsideration.
The key phrase in this provision is "considers that there are facts of a crime"; this is a judgment at the preliminary investigation stage, not a final determination. Applied to a specific case, whether a case involving the same virtual asset loss can be accepted depends on four points:
(1) What crime is reported
In practice, virtual asset-related cases may involve multiple crimes, and different crimes entail different constitutive elements and directions of evidence collection:
Fraud, which targets the conduct of fabricating facts to obtain property; structurally it is one-on-one deception, and investigators following this line examine what false statements the other party made and whether the victim transferred money because of them.
Fund-raising fraud, which targets raising funds from the public by fraudulent means for the purpose of illegal possession; its features are targeting an unspecified majority, public promotion, and promising repayment of principal and interest or payment of returns. Where leading trades and calling orders are accompanied by group formation, public promotion and promised returns, most such cases fall here.
There are also three other crimes:
Illegal absorption of public deposits, which differs from fund-raising fraud in whether there is a purpose of illegal possession; where evidence shows that the funds were actually invested in the claimed business operations and the inability to pay was merely due to business failure, there is greater scope for applying the illegal absorption offense.
the crime of organizing or leading a pyramid scheme, which targets hierarchical activities that use the number of recruited persons as the basis for compensation and rebates; if a signal-following model simultaneously designs hierarchical rebates and downline commissions, it may concurrently constitute this crime.
the crime of illegal business operations, which in the virtual currency field typically arises in the links of exchanging legal tender for virtual currency and fund payment and settlement, corresponding to the illegal foreign exchange trading type and the payment and settlement type of the crime of illegal business operations.
The charge will not be fixed at the time of reporting and will be adjusted as the investigation proceeds, but the direction at the time of reporting determines what the case-handling personnel will primarily examine during the first review; if the reporter only emphasizes that they were defrauded but cannot state what facts the other party fabricated, it will be very difficult for the reviewing personnel to conduct a preliminary inquiry in the direction of the crime of fraud.
(2) Whether the amount meets the threshold
Article 1 of the Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues Concerning the Specific Application of Law in the Handling of Criminal Cases of Fraud (Fa Shi [2011] No. 7) provides that where the value of fraudulently obtained public or private property is between 3,000 yuan and 10,000 yuan, between 30,000 yuan and 100,000 yuan, or 500,000 yuan or more, it shall be respectively determined as a relatively large amount, a huge amount, or an especially huge amount as stipulated in Article 266 of the Criminal Law; the higher people's courts and people's procuratorates of provinces, autonomous regions, and municipalities directly under the Central Government may, in light of the local economic and social development conditions, jointly study and determine the specific amount standards to be implemented in their respective regions within the amount ranges stipulated in the preceding paragraph.
There is no unified nationwide filing amount, and the specific standards implemented in different localities are not consistent; in many regions the starting point for a relatively large amount is set between 3,000 yuan and 5,000 yuan, and if the reported amount cannot cross the local starting point, the filing of a fraud case lacks an amount basis.
There is another point, namely how the amount of loss is calculated; the case-handling authorities usually use the amount of funds actually invested by the victim after deducting the portion already returned as the basis, rather than the balance displayed in the platform account.
(3) Whether the evidence can point to deception
The time available at the preliminary inquiry stage is limited, and case-handling personnel place greater emphasis on whether a closed chain of leads can be formed within a short period; among the four questions of whose account the money left, whose account it entered, in what name the other party received the money, and where the money ultimately went, if any link is missing, the preliminary inquiry will be stuck there.
Most reports are not filed not because the evidence does not exist, but because the form of the evidence is not right; a large amount of chat records retains only conclusions and not the process; there are only transfer receipts and no conversation at the time of transfer; there are only the platform's promotional pages and no information on the operating entity behind the pages.
When the materials are scattered, it is far more effective for the reporter to first piece together a coherent line of events than to leave the investigating officers to piece it together themselves.
(4) Bearing the loss oneself is not a shield against criminal case filing
This is one of the most frequently misunderstood points in virtual asset cases:
Article 19 of the Notice on Further Preventing and Handling Risks Associated with Virtual Currencies and Related Matters (Yin Fa [2026] No. 42) issued by the People's Bank of China and seven other departments provides that where any entity or individual invests in virtual currencies, real-world asset (RWA) tokens and related financial products in violation of public order and good morals, the relevant civil juristic acts are void, and the resulting losses shall be borne by the investor; where such conduct is suspected of disrupting financial order or endangering financial security, the relevant departments shall investigate and handle it in accordance with law.
This rule is often understood to mean that, since losses are borne by the investor, there is no need to report the matter. That understanding skips over the scope of application of the provision; the subject of Article 19 is any entity or individual investing in virtual currencies, and it assesses the validity of the investment conduct itself under civil law and the civil bearing of losses, but it cannot assess whether the other party fabricated facts or had the purpose of illegal possession in the course of that process.
At the same time, Article 11 of the same Notice provides that the Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the National Financial Regulatory Administration, the China Securities Regulatory Commission and other departments, as well as judicial and procuratorial organs, shall, in accordance with the division of duties, strictly crack down in accordance with law on fraud, money laundering, illegal business operations, pyramid selling, illegal fundraising and other illegal and criminal activities related to virtual currencies and real-world asset tokenization, as well as related illegal and criminal activities conducted under the guise of virtual currencies, real-world asset tokenization and the like; Article 18 also makes clear that where conduct in violation of this Notice involving the carrying out of relevant illegal financial activities, or the provision of services for such activities, constitutes a crime, criminal liability shall be pursued in accordance with law.
In the same Notice, the bearing of investment losses by the investor and the strict crackdown on fraud coexist, and the two govern different levels: the former governs whether investors must bear civil consequences for their own participation, while the latter governs whether those who perpetrate deception must bear criminal liability. Using the former to exempt the latter from liability applies civil rules to a criminal question.
(5) If the case cannot be filed, there are still two steps to take
1. Apply for reconsideration and review.Article 179 of the Provisions on the Procedures for Public Security Organs Handling Criminal Cases provides that where a complainant is dissatisfied with a decision not to file a case, the complainant may, within seven days after receiving the notice of the decision not to file a case, apply to the public security organ that made the decision for reconsideration, and the public security organ shall make a decision and serve it within thirty days after receiving the reconsideration application; where the complainant remains dissatisfied with the reconsideration decision, the complainant may, within seven days after receiving the reconsideration decision, apply to the public security organ at the next higher level for review, and the public security organ at the next higher level shall make a decision within thirty days. Where the case is major and complex, the time limits for reconsideration and review may be extended, but the extension may not exceed thirty days, and the applicant shall be notified in writing.
2. Apply for procuratorial supervision.Article 113 of the Criminal Procedure Law provides that where a victim believes that a public security organ has failed to file and investigate a case that should be filed and investigated, and raises this with a people's procuratorate, the people's procuratorate shall require the public security organ to explain the reasons for not filing the case; where it considers that the reasons for not filing the case cannot be sustained, it shall notify the public security organ to file the case, and the public security organ shall file the case upon receiving the notification.
What truly needs to be supplemented at this stage is not a stronger statement, but a complete chain of evidence.
IV. Assemble the Four Categories of Materials Before Reporting to the Police
Preparing materials is not about making the case sound bigger, but about enabling the case-handling personnel to form a preliminary judgment on the facts of the crime at the preliminary investigation stage:
(1) Records of Promotional Statements
This includes profit commitments, principal-guarantee statements, and claims of inside information in group chats, promotional content in short videos and on WeChat official accounts, and the platform's profit rules and event pages. The case-handling authorities need these because the element of fabricated facts must be tied to specific statements; the deceptive conduct in the crime of fraud must have specific content. Statements such as principal guarantee, guaranteed profit, and internal channels are first-hand materials for determining whether facts were fabricated, and are also the starting point for distinguishing exaggerated promotion from fraud.
Without these records, all that remains is the statement [I believed him at the time], which cannot be verified in legal terms.
(2) Records of Transfers and Top-ups
This includes bank statements, third-party payment records, virtual asset transfer-out records, and platform top-up orders. The flow of funds is the main thread of the preliminary investigation; each transfer-out must correspond to a point in time, a payee, and a statement made at that time, forming a corresponding relationship.
For on-chain transfers, the transaction hash and receiving address must also be retained. Although the transfer path of virtual assets is complex, it is traceable. The absence of these raw data not only undermines the ability to prove the fact of fund delivery to the case-handling authorities, but also makes subsequent tracing of where the coins went extremely difficult.
(3) Clues About the Platform and Identities
This includes the platform domain name, the source of the application download, the name and registration information of the operating entity, the name on the receiving account, the social media accounts and mobile phone numbers of the lead teachers, and identity clues about the group owners. Determining jurisdiction and the targets of investigation depends on these.
A common difficulty in virtual asset cases is the inability to identify a clear person to be prosecuted: the platform servers are overseas, and the receiving accounts used are purchased accounts. The more specific the clues, the easier it is to initiate a preliminary investigation.
(4) Communication records
These include the complete dialogue from initial contact through contribution to the demand for withdrawal, without excerpting or deletion; the causal chain is hidden in this chronological order: what the other party said, what the victim relied on in deciding to contribute, when evasions began, and whether the reasons for evasion were consistent from beginning to end can only be seen on a complete timeline.
Deleting the parts unfavorable to oneself, or retaining only the final few arguments, will instead break the entire chain.
V. After case filing, can the money be recovered?
The recovery and restitution provisions under the Criminal Law are ancillary to the criminal case itself and are limited to the perpetrator's illegal gains and their transformed forms; the extent to which they can be enforced depends on whether the illicit money and property have been seized or frozen and whether they have been transferred abroad.
In virtual asset cases, however, funds often pass through multiple layers of transfer and are moved overseas; the realistic recovery rate along this path is usually lower than the parties' expectations.
Whether a separate civil action can still be brought after criminal case filing, and against whom it should be brought, is another independent path, involving the determination of the same facts and the choice of an eligible defendant; for relevant details, see Attorney Hua's previous articleThe police have already filed a case; can the victim still bring a separate action?
In summary
Under the current regulatory rules, the rule that losses from virtual asset-related transactions are borne by the parties themselves directly affects the civil rights-protection path, and in practice it is often misinterpreted as an obstacle to criminal reporting; the core of distinguishing investment risk from criminal fraud lies in whether the loss of funds results from market fluctuations or from the other party's fabrication of facts and misleading deception: the former is ordinary investment risk, with consequences borne by the parties themselves, while only the latter may fall within the scope of criminal-law evaluation.
Virtual asset platform pages, on-chain transaction records, and chat communication evidence are highly susceptible to destruction or loss; the timing of reporting and the completeness of original materials are more critical than after-the-fact written argumentation. For the parties concerned, there are two controllable priorities: 1. Before reporting, preserve and organize all evidence materials as completely as possible; 2. When assessing the nature of the case, anchor to objective, verifiable facts rather than subjective feelings.
