Induced by an acquaintance to invest in virtual assets, the money was transferred out and the other party then became unreachable; the court returned the filing, and the police station said "this is an investment dispute." This article breaks down the common sticking points that lead mainland courts to refuse to accept or refuse to support a case, and the conditions and sequence for initiating the civil and criminal paths.

A party's first reaction is usually "because virtual assets are not protected by law, the courts won't touch it." That understanding is only a small part correct. Courts usually do not decline a case because of the words "virtual assets" themselves, but because one link in the chain—the cause of action, the parties, the evidence, or the validity of the contract—has a problem.

First distinguish three different kinds of "not accepted." The first is improper jurisdiction or improper parties: who the defendant is, where the defendant is domiciled, where the contract is performed—if even a clear defendant and basic evidence cannot be produced, the court will require correction or even return the filing. The second is choosing the wrong cause of action: if the dispute is framed as an "investment contract dispute," the court will first examine whether that investment contract is valid; if framed as "private lending," "unjust enrichment," or "entrustment contract," the focus of review is entirely different. The third is that the validity of the contract is substantively denied: the court accepts the case, but after trial finds the relevant civil juristic act invalid and dismisses the claims. The next steps for these three situations are completely different, and whether the party receives a written ruling or an oral notice directly determines whether an appeal can be filed and whether a new action can be brought under a different cause of action.

The real structure of an acquaintance-induced dispute is often more complex than the party believes. The introducer, the recipient, the operator, and the fund-collection account are often not the same entity. The party transfers money to the introducer, the introducer transfers it to the operator, and the operator then uses it for trading or simply appropriates it. If only the introducer is sued, the court will ask: what is the legal relationship between you and him? Is it lending, entrustment, or joint investment? If only the operator is sued, issues of jurisdiction and service arise. So the first step is not to rush to draft a complaint, but to map out the fund chain: who introduced it, who received the money, which account the money entered, whether there is a written agreement or chat record, and whether the other party promised principal protection or returns.

Here is an easily overlooked step: if the court refuses to file or refuses to accept the case, be sure to obtain a written ruling or written notice. An oral statement that "we won't accept this" leaves no verifiable trace, and the party can neither appeal nor determine whether the issue is jurisdiction or substance. Only after obtaining a written document can one decide whether to change the cause of action, change the defendant, supplement evidence, or turn to criminal reporting.

After a contract is invalid, can the money still be recovered?

Mainland regulatory stance on virtual assets is clear: virtual assets do not have the same legal status as legal tender, and conducting business activities within the territory such as exchange between legal tender and virtual assets, exchange between virtual assets, buying and selling as a central counterparty, and providing information intermediation and pricing services for trading constitutes illegal financial activity and is strictly prohibited. Regulatory documents also make clear that where any unit or individual invests in virtual assets and related financial products in violation of public order and good morals, the relevant civil juristic act is invalid, and the resulting losses are borne by the investor; where suspected of disrupting financial order or endangering financial security, the relevant authorities will investigate and deal with it according to law.

The direct implication of this passage for a party is: if the relationship between you and the other party is characterized as a contract to "invest in virtual assets," the court is likely to find the contract invalid and hold that the losses should be borne by you. This is the real reason many parties feel that "I was clearly cheated, yet the court won't touch it"—not that the court won't act, but that the validity of the contract under this cause of action is itself denied.

But an invalid contract does not mean all claims are dismissed. The key is whose pocket the funds actually entered and what the parties agreed. If the relationship between the parties is in fact a lending relationship, with an IOU, transfer records, and repayment terms, then even if the funds were used for virtual asset trading, the lending relationship itself may still be evaluated separately. If the other party never put the money into trading but directly appropriated or squandered it, this may constitute unjust enrichment or even fraud, and the basis of the claim is then not an "investment contract" but "return of property" or "compensation for losses." If the relationship is one of entrustment and the trustee failed to handle the matter as agreed, the principal may claim return of the entrusted property.

The facts that determine success or failure usually center on a few points: whether there was a genuine intent to lend, whether there was a principal-protection promise, whether the funds were personally appropriated rather than invested in trading, and whether the other party fabricated a project or concealed the truth. The most common misjudgment is that a party assumes "the other party cheated me" necessarily means victory, but the court first looks at the flow of funds and the parties' agreement, not the party's subjective feelings. The recommended action is therefore: first organize transfer records, chat records, the other party's identity information, and any written materials into a complete timeline, then work with a lawyer to determine the most appropriate cause of action, rather than starting with "investment contract dispute."

Report first or sue first: the sequencing issue in civil-criminal crossover cases

Civil and criminal are not a slogan of choosing one or the other, but two paths with different initiation conditions, burdens of proof, and consequences. Getting the sequence wrong means they drag each other down.

The conditions for initiating the criminal path are the existence of fabricated facts, concealment of the truth, and an intent to illegally possess, together with meeting the case-filing threshold. In acquaintance-induced disputes, if the other party fabricated a project, forged earnings records, or became unreachable or transferred assets after obtaining the money, these facts point to a relatively high possibility of fraud. However, when accepting a case, the public security authority will distinguish between an "investment loss" and "fraud": if the project genuinely existed, the party voluntarily participated, and the loss was due to market reasons, it will generally not be handled as a criminal case. Therefore, when reporting the case, the focus of the materials submitted is not "how much money I lost," but "what false statements the other party made and what they did with the money after receiving it."

The conditions for initiating the civil path are a clear defendant, specific litigation claims, and basic evidence. The advantage of the civil path is that the threshold for initiation is relatively low and the procedure is relatively fast; the disadvantage is that even if the case is won, enforcement may still come to nothing if the other party has already transferred assets. The advantage of the criminal path is that once a case is filed, the public security authority may take compulsory measures, freeze accounts, and recover stolen property to mitigate losses; the disadvantage is that the threshold for case filing is high, the cycle is long, and the outcome is uncertain.

The mutual influence of the two paths requires particular attention. After a criminal case is filed, the related civil case may be suspended pending the criminal outcome; after a civil judgment is won and enforcement begins, if it is discovered that the other party is suspected of a crime, the matter may also be transferred to the public security authority. A more realistic risk is that if the party initiates both paths simultaneously, and the statements in the civil complaint are inconsistent with the statements in the criminal report materials, the opposing lawyer will seize on this contradiction to attack the party's credibility. Therefore, the recommended course of action is: first secure the evidence, then decide the order. The evidence includes transfer receipts, chat records, the other party's identity information, any written agreements, and an explanation of the flow of funds. Once secured, determine together with a lawyer whether to report the case first or file suit first; do not initiate both paths simultaneously and create conflicting accounts.

One boundary must be made clear here: whether civil or criminal, no outcome can be promised. Whether a case can be filed, whether the money can be recovered, and how long it will take to obtain a result depend on the case-handling authority's assessment of the facts and evidence, as well as the actual situation of the other party's assets. What this article can help the party do is prepare the materials, choose the right path, and arrange the order, rather than predict the outcome.

Verification Checklist

  • Obtain the court's written ruling or notice and confirm whether the issue concerns jurisdiction, the cause of action, or the substantive merits
  • Map the chain of funds: who made the introduction, who received the money, which account the money entered, and whether there are written agreements or chat records
  • Organize transfer records, chat records, the other party's identity information, and an explanation of the flow of funds to form a complete timeline
  • Determine the most appropriate cause of action: private lending, unjust enrichment, or a commissioned contract, rather than directly pleading an investment contract dispute
  • Decide whether to report the case first or file suit first, avoiding initiating both simultaneously and creating conflicting statements
  • After a bank card is frozen, do not cancel it, transfer assets, or delete records; first confirm the freezing entity and the cause of action
  • Prepare identity materials, transaction background materials, and an explanation of the source and use of funds, and submit them to the freezing authority
  • Verify the licensing status of counterparties before trading in Hong Kong, and retain KYC and source-of-funds records
  • Monitor the progress of the Legislative Council's deliberation of the licensing regime for virtual asset trading services in Hong Kong

Reference materials

  1. Notice of the People's Bank of China, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration for Market Regulation, the National Financial Regulatory Administration, the China Securities Regulatory Commission and the State Administration of Foreign Exchange on Further Preventing and Addressing Risks Relating to Virtual Currencies and Other Matters (Yin Fa [2026] No. 42) | Eight departments including the People's Bank of China | 2026-02-06 | Mainland China | current | https://www.pbc.gov.cn/tiaofasi/144941/3581332/2026020619591971323/index.html | verified at 2026-09-16T12:13:01.980Z
  2. Notice of the People's Bank of China, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration for Market Regulation, the National Financial Regulatory Administration, the China Securities Regulatory Commission and the State Administration of Foreign Exchange on Further Preventing and Addressing Risks Relating to Virtual Currencies and Other Matters_China Securities Regulatory Commission | China Securities Regulatory Commission (reprint) | 2026-02-06 | Mainland China | current | https://www.csrc.gov.cn/csrc/c100028/c7614318/content.shtml | verified at 2026-09-16T12:13:02.242Z
  3. Responses of Relevant Officials of the People's Bank of China and the China Securities Regulatory Commission to Questions from the Press on the Notice on Further Preventing and Addressing Risks Relating to Virtual Currencies and Other Matters_China Securities Regulatory Commission | People's Bank of China, China Securities Regulatory Commission | 2026-02-06 | Mainland China | official_disclosure | https://www.csrc.gov.cn/csrc/c100028/c7614320/content.shtml | verified at 2026-09-16T12:13:02.400Z
  4. Hong Kong Customs - Press Releases | Hong Kong Customs | 2021-07-15 | Hong Kong | individual_case | https://www.customs.gov.hk/tc/customs-announcement/press-release/index_id_305.html | verified at 2026-09-16T12:13:06.454Z
  5. VAdealing_consultation_conclusion_e | Financial Services and the Treasury Bureau and Securities and Futures Commission of Hong Kong | not_stated | Hong Kong | draft | https://www.fstb.gov.hk/fsb/en/publication/consult/doc/VAdealing_consultation_conclusion_e.pdf | verified at 2026-09-16T12:13:11.710Z
  6. VAdealing_consultation_conclusion_c | Financial Services and the Treasury Bureau and Securities and Futures Commission of Hong Kong | not_stated | Hong Kong | draft | https://www.fstb.gov.hk/fsb/tc/publication/consult/doc/VAdealing_consultation_conclusion_c.pdf | verified at 2026-09-16T12:13:14.118Z
  7. S8 Overview | Securities &Futures Commission of Hong Kong | Securities and Futures Commission of Hong Kong | not_stated | Hong Kong | current | https://www.sfc.hk/en/Welcome-to-the-Fintech-Contact-Point/Virtual-assets/Overview | verified at 2026-09-16T12:13:14.854Z