The Legal Boundaries in Virtual Money Investment Disputes: Distinguishing Civil Disputes from Criminal Fraud

Since the regulatory policies were introduced in 2021, my country’s attitude towards Virtual Money has gradually become clear: it does not prohibit citizens from investing, but does not provide legal protection, and the risks are borne by the individuals. Virtual Money is not regarded as legal tender and cannot circulate in the market. This has resulted in related legal disputes being difficult to resolve through civil litigation, while criminal cases face higher proof thresholds.

However, in judicial practice, the property attributes of mainstream Virtual Money are gradually being recognized. There are even cases where disputes essentially related to investment are treated as criminal cases. Therefore, it becomes particularly important to clearly distinguish between civil disputes in Virtual Money investment and criminal offenses.

Case Analysis

In a public case at the Intermediate People's Court of Foshan, Guangdong, the defendant Ye was sentenced to 11 years in prison for fraud. The case revealed that between May and June 2022, Ye fabricated an investment project, promising high returns, which induced many people to invest a total of 2.5 million yuan, including 500,000 worth of USDT. Ye used most of the funds for personal consumption and debt repayment, ultimately unable to fulfill the promises.

The court rejected the defense arguments put forward by the defendant and their defense lawyer regarding "private lending relationship" and "insufficient evidence." It is worth noting that the court treated USDT as equivalent to "funds," which is a qualitative issue that is controversial.

The Boundary Between Civil Disputes and Criminal Fraud

The distinction lies in whether the perpetrator has the subjective intent of illegal possession and whether they have objectively committed fraudulent acts. In this case, the main evidence on which the court determined that Ye certain constituted the crime of fraud includes:

1. Use the investment funds to pay off personal debts.
2. A portion of the funds is used for lending to others and investing in Virtual Money.
3. Quickly purchase luxury goods after receiving the investment
4. Collecting investments while already in debt and without fixed assets
5. Personal income and expenditure are seriously imbalanced
6. Create false transfer records to deceive investors

Considering these factors comprehensively, it is difficult to dispute the allegations of fraud, unless the defendant can provide strong evidence of genuine investment.

Virtual Money as a Target for Fraud

The court ruled that virtual money has the potential for management, transfer, and value, and can be the object of fraud crimes. In this case, through WeChat chat records and the defendant's testimony, the court confirmed that the defendant received USDT valued at 500,000 yuan, and regarded it as part of the fraudulent behavior.

Key Factors in Fraud Determination

1. Purpose of illegal possession: Whether the actor intended to illegally possess someone else's property from the very beginning.
2. Fabricating facts or concealing the truth: such as inventing false platforms, exaggerating technological breakthroughs, concealing the use of funds, etc.
3. The victim disposes of property based on a misunderstanding: Whether the investor made an investment decision due to being misled.
4. The authenticity and legality of the flow and use of funds: Are the funds used for actual project investment, or are they misappropriated for personal consumption or illegal purposes.

Conclusion

Legal disputes in the field of virtual money investment present a complex situation intertwined with civil and criminal issues. Investors should enhance their risk awareness, make prudent decisions, and not easily believe exaggerated claims. When facing losses, it is necessary to rationally assess whether to pursue civil or criminal avenues. Only by proceeding within regulations can a balance between technological development and legal protection be achieved.