Virtual Money Investment Disputes: The Boundary Between Civil Disputes and Criminal Fraud

Introduction

Since the release of the "9.24 Notice" in 2021, a consensus has formed regarding the regulatory policy on Virtual Money in mainland China: citizens are not prohibited from investing in Virtual Money and its derivatives, but actions that violate public order and good morals are not protected by law, and investors must bear the risks themselves.

Since virtual money is not considered legal tender, it cannot circulate as fiat currency in the market. This has led to some dilemmas in judicial practice: civil courts generally do not accept disputes related to virtual money, while the evidentiary standards for criminal cases are quite high.

However, the recognition of the property attributes of mainstream Virtual Money by judicial authorities is increasing. There are even extreme cases where disputes over Virtual Money investments, which do not constitute criminal offenses, are filed, prosecuted, or even judged. Therefore, it is particularly important to clearly distinguish between "civil disputes" and "criminal offenses" in Virtual Money investment disputes. This article will provide a detailed analysis through a specific case.

1. Case Overview

A public case from the Intermediate People's Court of Foshan City, Guangdong Province ((2024) Yue 06 Criminal Final 300) has the following general facts:

Between May and June 2022, Ye fabricated an investment project and promised to provide the victims with high interest, enticing Wu, Chen, Ye Kun, and others to invest, with a total value of 2.5 million yuan (among which Ye Kun invested 500,000 worth of USDT).

After receiving these funds, Ye used most of them for daily consumption and repaying personal debts. Later, due to inability to pay interest and return the principal, the victim reported the case.

After the court's trial, it was determined that Ye Moumou constituted the crime of fraud, and he was sentenced to 11 years of fixed-term imprisonment in the first instance. After Ye Moumou appealed, the Foshan Intermediate Court dismissed the appeal and upheld the original judgment.

The main defense opinion of the defendant Ye and his defense lawyer:

1. Ye XX and the victim have a private lending relationship;
2. The evidence is insufficient to prove that Ye某某 received Virtual Money worth 500,000 yuan from Ye某坤.

Both of these opinions were not adopted by the first and second instance courts.

It is worth noting that the court directly described the USDT received by the defendant as "funds," which is a controversial characterization. Strictly speaking, citizens are generally not protected by law when they incur investment losses after purchasing virtual money such as USDT with legal tender. However, if virtual money is defrauded by others, should it be protected by law?

Current judicial practice tends to provide certain protections for mainstream Virtual Money, but it is necessary to clearly distinguish the boundaries between civil investment and criminal offenses.

2. From "Civil Disputes" to "Criminal Fraud": Standards of Identification

The essential difference between "civil disputes" and "criminal fraud" lies in whether the perpetrator has the subjective intent of illegal possession and whether they have objectively committed fraudulent acts.

In this case, the court found that Ye XX constituted the crime of fraud primarily due to the following reasons:

1. Ye XX admitted to using part of the investment funds to pay off old debts;
2. Ye certain acknowledged that part of the funds was used for lending and investing in Virtual Money;
3. The bank statement shows that after receiving 1 million yuan, Ye purchased a Mercedes sedan for 438,000 yuan.
4. Ye XX was already in debt when receiving the investment funds and had no property;
5. Ye's monthly income at that time was 7,000 to 8,000 yuan, but he needed to pay 10,000 yuan for car loans each month, resulting in a deficit;
6. Ye certain made false virtual money transfer records to deal with the victim's claims, and had not actively raised funds for repayment before the incident.

These factors combined make it difficult for the court to recognize Ye's defense. Unless he can provide evidence that the victim's money was indeed used for real investment.

3. Court Determination: Virtual Money Can Be Used as an Object of Fraud

In this case, a noteworthy point is that the court recognized USDT valued at 500,000 yuan as the "investment amount". Although the defense lawyer questioned the inability to prove that Ye received this virtual money, the court determined based on the following reasons:

1. The WeChat chat record shows that Ye confirmed receiving this amount of USDT;
2. Ye XX admitted in the record that he received virtual money worth 500,000 yuan.

The court believes that virtual money has the possibility of management, the possibility of transfer, and value, and can be used as an object of fraud. Therefore, it is determined that Ye某某 defrauded Ye某坤 of USDT worth 500,000 yuan.

IV. Practical Judgment: Does being deceived by an investor necessarily constitute fraud?

Disputes in virtual money investment do not all constitute fraud crimes. To determine whether a fraud crime is established, several key factors typically need to be considered:

1. Does the perpetrator have the "intent to unlawfully possess"?

   • This is one of the subjective elements of the crime of fraud.
   • It is necessary to determine whether the actor intended to illegally occupy the property of others from the beginning.
   • If the actor has a genuine intention to operate, but fails due to technical or market reasons, it generally falls under investment risk.

2. Is there any behavior of fabricating facts or concealing the truth?

   • The act of committing fraud is "fabricating facts" or "concealing the truth".
   • Common manifestations: Fabricating non-existent Virtual Money platforms, claiming false technological breakthroughs or policy support, concealing the use of funds, etc.

3. Did the victim "dispose of property based on a misunderstanding"?

   • It is necessary to examine whether the victim made an investment decision due to being misled.
   • If investors actively participate in high-risk projects after fully understanding the risks, even losses are unlikely to constitute fraud.

4. Are the funding flows and uses real and legal?

   • Investigate the true source of funds.
   • If funds are rapidly transferred, used for personal consumption, or for illegal purposes, they are more likely to be deemed fraudulent.
   • If the funds are used for actual project investment and the financial accounts are clear, even if the project fails, it is more likely to be regarded as a civil dispute.

V. Conclusion

The investment field of virtual money is characterized by both opportunities and risks, and investors need to be vigilant about potential legal traps. From a judicial practice perspective, related disputes present a complex trend of "civil and criminal intertwining," and the determination of criminal fraud requires strict adherence to legal standards.

Ordinary investors should remain vigilant and not easily believe in claims such as "insider information" or "guaranteed profit," enhancing their risk awareness. In case of losses, they should rationally assess their rights protection options and choose between civil litigation or criminal filing based on the specific circumstances.

Although the virtual world is intangible, legal standards should not be ambiguous. Only by developing within regulations can a balance between technological progress and legal protection be achieved.