Author: Liu Yang | Nakamoto Ritsu
Original link: https://mp.weixin.qq.com/s/j6NgIB7MXlWXdOqyJTFEGQ
Disclaimer: This article is a reprint. Readers can find more information by following the original link. If the author has any objections to the reprint format, please contact us and we will modify it to suit the author's request. This reprint is for informational purposes only and does not constitute investment advice or represent the views or positions of Wu Blockchain.
On November 27, 2020, a criminal verdict was leaked on the Internet, which not only ignited the crypto, but also attracted the attention of many traditional legal professionals, and even attracted the attention of people outside the legal industry. Yes, that is the plus token case, which may be one of the largest pyramid scheme cases to date.
Just how large was the scale? The second-instance criminal ruling in the PlusToken case states, "The PlusToken platform collected a total of 314,211 Bitcoins, 9,174,201 Ethereums, 928,280,240 Ripple, 117,450 Bitcoin Cash, 96,023 Dash, 1,106,016,2640 Dogecoins, 1,847,674 Litecoins, and 51,363,309 EOS from members." "According to the Price Determination Center of the Yancheng Municipal Price Bureau, based on the lowest price between May 1, 2018, and June 27, 2019, the equivalent of these eight digital currencies is RMB 148,037.50." These "××××" (or "×××") make the case value unclear.
According to the market value at the time of writing, the Bitcoin involved in the case is worth 37 billion US dollars , and the two currencies of Dogecoin and Ripple alone are worth almost 5 billion US dollars (this is not the time when the market value is the highest).
Back to the topic, the second-instance criminal ruling in the Plustoken case mentioned: "The issue of the disposal of confiscated stolen goods. Upon investigation, the evidence in the case confirmed that Chen Bo applied to the Yancheng Public Security Bureau to entrust Beijing Zhifan Technology Co., Ltd. to sell and liquidate the digital currency seized by the public security organs in accordance with the law, and all the funds will be used as his restitution of stolen goods." This is the core point of this case that has attracted widespread attention. At that time, people in the crypto were worried about whether the huge amount of virtual currency would "dump" the market, legal professionals were concerned about whether such disposal was legal, and people outside the legal industry smelled a business opportunity to get rich quickly, which also made the issue of the disposal of the virtual currency involved appear in the public eye for the first time.
As a longtime defense lawyer in virtual currency criminal cases, I've encountered the disposal of virtual currency involved long before the Plus Token case. Back then, there were no fixed rules for handling virtual currency. Some investigators would bring suspects to court and have them sell the coins themselves on trading platforms. Others would have their family members sell the coins on their behalf. Still others would have the suspects entrust a third-party company to liquidate the coins. After the Plus Token case, entrusting third-party companies to liquidate the coins became the mainstream approach. Regardless of the method, the suspect's voluntariness was questionable.
Let's call this stage "Third-Party Disposal Phase 1.0 ." In Phase 1.0, third-party disposal methods involved finding large-volume OTC (Over-The-Counter) traders, who then acquired the virtual currency and subsequently sought buyers in the market. The OTC traders profited from the price difference, while the third-party companies earned service fees.
The third-party company earns its service fees in this way. For example, if the agreed-upon disposal service fee is 15%, the third-party company receives 100 yuan worth of virtual currency from the judicial authorities. After disposing of the virtual currency through an OTC dealer, it only needs to transfer 85 yuan back to the judicial authorities. This means that the third-party company can make a real profit during the disposal process, and the profit can be substantial. As for the high handling fee, the third-party company explains it as a result of price fluctuations, transaction friction, and other factors.
Whether the suspect himself or his family handles the matter, or a third-party company uses an OTC vendor to handle the matter, is there any legal basis for doing so? It's certainly true. On September 4, 2017, the People's Bank of China and seven other government departments issued the "Announcement on Preventing Risks in Token Issuance and Financing." The third paragraph of this announcement strengthens the management of token financing trading platforms. Specifically, from the date of this announcement, any so-called token financing trading platform is prohibited from engaging in the exchange of legal tender for tokens or "virtual currencies," buying or selling tokens or "virtual currencies," or acting as a central counterparty for the purchase or sale of tokens or "virtual currencies," or providing pricing or information intermediary services for tokens or "virtual currencies."
If you look closely, the 94 "Announcement" regulates token financing trading platforms, not individuals, so it is ultimately up to OTC merchants to realize the value, which is not a big problem.
But it is not completely without problems. Since the disposal of virtual currencies involved in the case is still a niche business and has excess profits, it has also spawned some illegal problems, such as power-for-money transactions, case handlers embezzling virtual currencies, third-party companies using virtual currencies temporarily stored by judicial authorities to place orders in the market and lose all of them, OTC traders deliberately going to the market to collect black money and transferring it to special accounts involved in the case (special accounts are not afraid of being seized and frozen anyway), and many OTC traders have been cracked down by judicial authorities in other places for being involved in black money, and so on. In short, it is very lively.
In 2021, as judicial authorities intensified their crackdown on the crypto, disposal companies of all sizes sprang up like mushrooms after rain. I once described this in an article:
There are more sickles than leeks.
In September 2021, a major event occurred that changed the landscape of handling the virtual currencies involved. On September 15, the People's Bank of China and ten other departments issued the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Transaction Speculation", known as the "924 Notice". It stated that virtual currency-related business activities are illegal financial activities. Virtual currency-related business activities such as exchanging legal tender and virtual currency, exchanging virtual currencies, buying and selling virtual currencies as a central counterparty, providing information intermediary and pricing services for virtual currency transactions, token issuance and financing, and virtual currency derivatives trading are suspected of illegal financial activities such as illegal issuance of token tickets, unauthorized public issuance of securities, illegal operation of futures business, illegal fundraising, etc., and are strictly prohibited and resolutely banned in accordance with the law.
Compared with the 94 "Announcement", the "subject" before the prohibition of the above-mentioned behaviors is gone. The 94 "Announcement" regulates the token financing trading platform, while the 924 "Notice" does not specify the subject, but regulates "everything". Companies cannot do it, platforms cannot do it, and individuals cannot do it.
The previous method of having a third-party company organize a group of OTC merchants to realize cash is no longer feasible.
If domestic operations don't work, then take the business abroad. This is where the 2.0 phase of third-party disposal companies comes into being . In this 2.0 phase, all disposal companies' presentations, without exception, tout "overseas disposal" as their core selling point. But is this truly overseas disposal? Not necessarily.
In reality, the vast majority of virtual currency transactions are still conducted through domestic cross-trading. The funds deposited into judicial accounts are simply repatriated from overseas, but they are not the same money. It's important to clarify that the repatriated funds are not required to correspond exactly to the virtual currency transactions. This means it's impossible to verify whether the repatriated funds are virtual currency transactions from overseas.
I have reasons for this claim. First, several prominent individuals in a southern province or city were investigated by public security authorities elsewhere for "illegal disposal." Second, a disposal company consulted me on how to legally dispose of virtual currency, admitting, "After those individuals were arrested, all disposal operations ceased." Third, whether the disposal was overseas or not, judicial authorities only recognize foreign exchange settlement documents. And those individuals were the ones who could obtain them.
Phase 2.0 of third-party disposal has also seen several changes: First, disposal fees have dropped significantly. With the increasing number of virtual currencies awaiting disposal across the country, the increasingly transparent nature of the disposal process, and competition among disposal companies, disposal fees have gradually dropped to below 10 percentage points. I've even heard of cases where fees have fallen to 4 percentage points. Second, some local governments have intervened in virtual currency disposal, putting asset packages up for public bidding. Disposal is supervised by relevant departments outside the judicial system, such as the Discipline Inspection Commission, the Political and Legal Affairs Commission, and the Finance Bureau. Third, handling fees are now separated into two streams: revenue and expenditure. Previously, a third-party company would receive 85 yuan for every 100 yuan it took. Now, for every 100 yuan it took, the company must return 100 yuan to the government, which then pays the pre-agreed handling fee to the third-party company through government expenditures.
At this stage, some well-known third-party disposal (matching) companies that made a lot of money in the early years no longer personally engage in specific disposal business. They often subcontract the assets to be disposed of to multiple teams for disposal. One reason is to set up a firewall in the middle, and the other is to carry out the work better.
Finally, in 2024, the Supreme People's Court took the initiative and listed "Research on the Disposal of Virtual Currency Involved in Cases" as a major judicial research topic in 2024. The research team includes at least universities and judicial organs in Beijing, Chongqing, and Shenzhen. The author was also fortunate to participate in some research activities in Beijing and Chongqing. The situation learned at the meeting is inconvenient to disclose. I will only talk about the third-party company disposal 3.0 stage based on the news releases publicly available on the Internet.
For a period before the third-party company's 3.0 phase of disposal, disposal work was halted due to uncertainty in various regions. Rumors circulated online that the market value of virtual currencies involved in the case, currently awaiting disposal by judicial authorities across my country, was an exaggerated figure. However, the emergence of Hong Kong has opened up a path to legal compliance in the disposal of the virtual currencies involved.
For example, some time ago, Beijing took the lead in announcing its successful experience in disposing of the virtual currencies involved in the case through the Beijing Equity Exchange in Hong Kong. According to the author's understanding, other regions are also exploring compliant disposal through Hong Kong. Through the author's analysis, I believe that although the practices of each party are different, they all follow the same principle, and there may be a "universal formula" among them.
First, the compliant disposal of the virtual currency involved in the case requires the State Administration of Foreign Exchange (SAFE) and domestic banks. Foreign exchange inflows must be reported to SAFE for recordation and repatriated through banking channels. Since this repatriation is via banking channels, Hong Kong banks are also indispensable. Second, according to Hong Kong banking regulations and the requirements of licensed Hong Kong trading platforms, Hong Kong banks cannot open accounts on trading platforms as the principal. Therefore, a local Hong Kong institution that can open accounts on trading platforms is required. Third, after the institution disposes of the virtual currency involved on the trading platform, it transfers the funds to a Hong Kong bank, which then reports the funds to SAFE for recordation and transfers the proceeds through the Hong Kong bank to a domestic bank.
As for the institutions outside this formula, they can be replaced at will. Companies or exchanges are not an indispensable part.
Therefore, the author offers the following suggestions: First, the disposal of the virtual digital currency involved in the case should be handled by provincial-level judicial authorities. Second, it is recommended that higher-level authorities take the lead in establishing a "green channel" between provincial-level judicial authorities and the head offices of state-owned banks. Judicial authorities should open a special account at the bank for the disposal of the virtual currency involved in the case and entrust the head office of the state-owned bank to handle the disposal on their behalf. Third, the head office of the state-owned bank should make full use of its overseas branches in Hong Kong or other locations where legal disposal is possible to complete the legal disposal of the virtual currency involved in the case overseas.
In short, reduce unnecessary circulation links, nationalize disposal profits, and maximize disposal efficiency.
Not long ago, the People's Court Daily published an article entitled "Handling Virtual Currency Involved in Criminal Cases: Challenges, Innovations and Judicial Responsibility". The article pointed out that "it is possible to explore entrusting a qualified third-party institution under the filing and supervision of the People's Bank of China, the Foreign Exchange Administration and other departments to exchange virtual currency into legal currency at market prices through a compliant licensed trading platform in overseas jurisdictions where virtual currency is legal, such as Hong Kong. After cashing out overseas, it should be handled in accordance with the provisions of the State Administration of Foreign Exchange's "Letter on the Opening of Foreign Exchange Accounts and Handling of Foreign Exchange Receipts and Payments by People's Courts in Foreign-Related Judicial Activities."
It is hoped that the Supreme People's Court, the superior unit of the People's Court Daily, will come up with a normative guidance document as soon as possible based on a thorough investigation of the practical experience of various regions and the investigation and research of various research teams, so as to thoroughly regulate the disposal of virtual currencies involved in the case.
Finally, here's the sentence I often say:
"Nothing has ever caused as much legal entanglement as Bitcoin."
Original link: https://mp.weixin.qq.com/s/j6NgIB7MXlWXdOqyJTFEGQ
Disclaimer: This article is a reprint. Readers can find more information by following the original link. If the author has any objections to the reprint format, please contact us and we will modify it to suit the author's request. This reprint is for informational purposes only and does not constitute investment advice or represent the views or positions of Wu Blockchain.
On November 27, 2020, a criminal verdict was leaked on the Internet, which not only ignited the crypto, but also attracted the attention of many traditional legal professionals, and even attracted the attention of people outside the legal industry. Yes, that is the plus token case, which may be one of the largest pyramid scheme cases to date.
Just how large was the scale? The second-instance criminal ruling in the PlusToken case states, "The PlusToken platform collected a total of 314,211 Bitcoins, 9,174,201 Ethereums, 928,280,240 Ripple, 117,450 Bitcoin Cash, 96,023 Dash, 1,106,016,2640 Dogecoins, 1,847,674 Litecoins, and 51,363,309 EOS from members." "According to the Price Determination Center of the Yancheng Municipal Price Bureau, based on the lowest price between May 1, 2018, and June 27, 2019, the equivalent of these eight digital currencies is RMB 148,037.50." These "××××" (or "×××") make the case value unclear.
According to the market value at the time of writing, the Bitcoin involved in the case is worth 37 billion US dollars , and the two currencies of Dogecoin and Ripple alone are worth almost 5 billion US dollars (this is not the time when the market value is the highest).
Back to the topic, the second-instance criminal ruling in the Plustoken case mentioned: "The issue of the disposal of confiscated stolen goods. Upon investigation, the evidence in the case confirmed that Chen Bo applied to the Yancheng Public Security Bureau to entrust Beijing Zhifan Technology Co., Ltd. to sell and liquidate the digital currency seized by the public security organs in accordance with the law, and all the funds will be used as his restitution of stolen goods." This is the core point of this case that has attracted widespread attention. At that time, people in the crypto were worried about whether the huge amount of virtual currency would "dump" the market, legal professionals were concerned about whether such disposal was legal, and people outside the legal industry smelled a business opportunity to get rich quickly, which also made the issue of the disposal of the virtual currency involved appear in the public eye for the first time.
As a longtime defense lawyer in virtual currency criminal cases, I've encountered the disposal of virtual currency involved long before the Plus Token case. Back then, there were no fixed rules for handling virtual currency. Some investigators would bring suspects to court and have them sell the coins themselves on trading platforms. Others would have their family members sell the coins on their behalf. Still others would have the suspects entrust a third-party company to liquidate the coins. After the Plus Token case, entrusting third-party companies to liquidate the coins became the mainstream approach. Regardless of the method, the suspect's voluntariness was questionable.
Let's call this stage "Third-Party Disposal Phase 1.0 ." In Phase 1.0, third-party disposal methods involved finding large-volume OTC (Over-The-Counter) traders, who then acquired the virtual currency and subsequently sought buyers in the market. The OTC traders profited from the price difference, while the third-party companies earned service fees.
The third-party company earns its service fees in this way. For example, if the agreed-upon disposal service fee is 15%, the third-party company receives 100 yuan worth of virtual currency from the judicial authorities. After disposing of the virtual currency through an OTC dealer, it only needs to transfer 85 yuan back to the judicial authorities. This means that the third-party company can make a real profit during the disposal process, and the profit can be substantial. As for the high handling fee, the third-party company explains it as a result of price fluctuations, transaction friction, and other factors.
Whether the suspect himself or his family handles the matter, or a third-party company uses an OTC vendor to handle the matter, is there any legal basis for doing so? It's certainly true. On September 4, 2017, the People's Bank of China and seven other government departments issued the "Announcement on Preventing Risks in Token Issuance and Financing." The third paragraph of this announcement strengthens the management of token financing trading platforms. Specifically, from the date of this announcement, any so-called token financing trading platform is prohibited from engaging in the exchange of legal tender for tokens or "virtual currencies," buying or selling tokens or "virtual currencies," or acting as a central counterparty for the purchase or sale of tokens or "virtual currencies," or providing pricing or information intermediary services for tokens or "virtual currencies."
If you look closely, the 94 "Announcement" regulates token financing trading platforms, not individuals, so it is ultimately up to OTC merchants to realize the value, which is not a big problem.
But it is not completely without problems. Since the disposal of virtual currencies involved in the case is still a niche business and has excess profits, it has also spawned some illegal problems, such as power-for-money transactions, case handlers embezzling virtual currencies, third-party companies using virtual currencies temporarily stored by judicial authorities to place orders in the market and lose all of them, OTC traders deliberately going to the market to collect black money and transferring it to special accounts involved in the case (special accounts are not afraid of being seized and frozen anyway), and many OTC traders have been cracked down by judicial authorities in other places for being involved in black money, and so on. In short, it is very lively.
In 2021, as judicial authorities intensified their crackdown on the crypto, disposal companies of all sizes sprang up like mushrooms after rain. I once described this in an article:
There are more sickles than leeks.
In September 2021, a major event occurred that changed the landscape of handling the virtual currencies involved. On September 15, the People's Bank of China and ten other departments issued the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Transaction Speculation", known as the "924 Notice". It stated that virtual currency-related business activities are illegal financial activities. Virtual currency-related business activities such as exchanging legal tender and virtual currency, exchanging virtual currencies, buying and selling virtual currencies as a central counterparty, providing information intermediary and pricing services for virtual currency transactions, token issuance and financing, and virtual currency derivatives trading are suspected of illegal financial activities such as illegal issuance of token tickets, unauthorized public issuance of securities, illegal operation of futures business, illegal fundraising, etc., and are strictly prohibited and resolutely banned in accordance with the law.
Compared with the 94 "Announcement", the "subject" before the prohibition of the above-mentioned behaviors is gone. The 94 "Announcement" regulates the token financing trading platform, while the 924 "Notice" does not specify the subject, but regulates "everything". Companies cannot do it, platforms cannot do it, and individuals cannot do it.
The previous method of having a third-party company organize a group of OTC merchants to realize cash is no longer feasible.
If domestic operations don't work, then take the business abroad. This is where the 2.0 phase of third-party disposal companies comes into being . In this 2.0 phase, all disposal companies' presentations, without exception, tout "overseas disposal" as their core selling point. But is this truly overseas disposal? Not necessarily.
In reality, the vast majority of virtual currency transactions are still conducted through domestic cross-trading. The funds deposited into judicial accounts are simply repatriated from overseas, but they are not the same money. It's important to clarify that the repatriated funds are not required to correspond exactly to the virtual currency transactions. This means it's impossible to verify whether the repatriated funds are virtual currency transactions from overseas.
I have reasons for this claim. First, several prominent individuals in a southern province or city were investigated by public security authorities elsewhere for "illegal disposal." Second, a disposal company consulted me on how to legally dispose of virtual currency, admitting, "After those individuals were arrested, all disposal operations ceased." Third, whether the disposal was overseas or not, judicial authorities only recognize foreign exchange settlement documents. And those individuals were the ones who could obtain them.
Phase 2.0 of third-party disposal has also seen several changes: First, disposal fees have dropped significantly. With the increasing number of virtual currencies awaiting disposal across the country, the increasingly transparent nature of the disposal process, and competition among disposal companies, disposal fees have gradually dropped to below 10 percentage points. I've even heard of cases where fees have fallen to 4 percentage points. Second, some local governments have intervened in virtual currency disposal, putting asset packages up for public bidding. Disposal is supervised by relevant departments outside the judicial system, such as the Discipline Inspection Commission, the Political and Legal Affairs Commission, and the Finance Bureau. Third, handling fees are now separated into two streams: revenue and expenditure. Previously, a third-party company would receive 85 yuan for every 100 yuan it took. Now, for every 100 yuan it took, the company must return 100 yuan to the government, which then pays the pre-agreed handling fee to the third-party company through government expenditures.
At this stage, some well-known third-party disposal (matching) companies that made a lot of money in the early years no longer personally engage in specific disposal business. They often subcontract the assets to be disposed of to multiple teams for disposal. One reason is to set up a firewall in the middle, and the other is to carry out the work better.
Finally, in 2024, the Supreme People's Court took the initiative and listed "Research on the Disposal of Virtual Currency Involved in Cases" as a major judicial research topic in 2024. The research team includes at least universities and judicial organs in Beijing, Chongqing, and Shenzhen. The author was also fortunate to participate in some research activities in Beijing and Chongqing. The situation learned at the meeting is inconvenient to disclose. I will only talk about the third-party company disposal 3.0 stage based on the news releases publicly available on the Internet.
For a period before the third-party company's 3.0 phase of disposal, disposal work was halted due to uncertainty in various regions. Rumors circulated online that the market value of virtual currencies involved in the case, currently awaiting disposal by judicial authorities across my country, was an exaggerated figure. However, the emergence of Hong Kong has opened up a path to legal compliance in the disposal of the virtual currencies involved.
For example, some time ago, Beijing took the lead in announcing its successful experience in disposing of the virtual currencies involved in the case through the Beijing Equity Exchange in Hong Kong. According to the author's understanding, other regions are also exploring compliant disposal through Hong Kong. Through the author's analysis, I believe that although the practices of each party are different, they all follow the same principle, and there may be a "universal formula" among them.
First, the compliant disposal of the virtual currency involved in the case requires the State Administration of Foreign Exchange (SAFE) and domestic banks. Foreign exchange inflows must be reported to SAFE for recordation and repatriated through banking channels. Since this repatriation is via banking channels, Hong Kong banks are also indispensable. Second, according to Hong Kong banking regulations and the requirements of licensed Hong Kong trading platforms, Hong Kong banks cannot open accounts on trading platforms as the principal. Therefore, a local Hong Kong institution that can open accounts on trading platforms is required. Third, after the institution disposes of the virtual currency involved on the trading platform, it transfers the funds to a Hong Kong bank, which then reports the funds to SAFE for recordation and transfers the proceeds through the Hong Kong bank to a domestic bank.
As for the institutions outside this formula, they can be replaced at will. Companies or exchanges are not an indispensable part.
Therefore, the author offers the following suggestions: First, the disposal of the virtual digital currency involved in the case should be handled by provincial-level judicial authorities. Second, it is recommended that higher-level authorities take the lead in establishing a "green channel" between provincial-level judicial authorities and the head offices of state-owned banks. Judicial authorities should open a special account at the bank for the disposal of the virtual currency involved in the case and entrust the head office of the state-owned bank to handle the disposal on their behalf. Third, the head office of the state-owned bank should make full use of its overseas branches in Hong Kong or other locations where legal disposal is possible to complete the legal disposal of the virtual currency involved in the case overseas.
In short, reduce unnecessary circulation links, nationalize disposal profits, and maximize disposal efficiency.
Not long ago, the People's Court Daily published an article entitled "Handling Virtual Currency Involved in Criminal Cases: Challenges, Innovations and Judicial Responsibility". The article pointed out that "it is possible to explore entrusting a qualified third-party institution under the filing and supervision of the People's Bank of China, the Foreign Exchange Administration and other departments to exchange virtual currency into legal currency at market prices through a compliant licensed trading platform in overseas jurisdictions where virtual currency is legal, such as Hong Kong. After cashing out overseas, it should be handled in accordance with the provisions of the State Administration of Foreign Exchange's "Letter on the Opening of Foreign Exchange Accounts and Handling of Foreign Exchange Receipts and Payments by People's Courts in Foreign-Related Judicial Activities."
It is hoped that the Supreme People's Court, the superior unit of the People's Court Daily, will come up with a normative guidance document as soon as possible based on a thorough investigation of the practical experience of various regions and the investigation and research of various research teams, so as to thoroughly regulate the disposal of virtual currencies involved in the case.
Finally, here's the sentence I often say:
"Nothing has ever caused as much legal entanglement as Bitcoin."
