I don’t know if Web 3.0 will come, but Criminal Case 3.0 in the currency circle is definitely coming.

I started to specialize in cryptocurrency criminal defense in 2019. My general intuitive feeling is that before plustoken cases, they can be called cryptocurrency criminal cases 1.0. At that time, the public prosecutors and law enforcement officers were repulsive to currency-related cases, so the defense work was relatively It's easy. There are many cases where arrests and prosecutions are not approved. The Plustoken case is a turning point. For a period of time in the future, it can be called the currency criminal case 2.0. It has two significant characteristics. First, a very few areas are "enthusiastic" about currency-related cases, and second, the investigators themselves have a certain understanding of currency. , I often talk on the phone with case investigators during defense. Judging from the results of the cases I have handled, innocence defense can still have a good effect in general, especially in the transfer review and prosecution stage. In many cases, I have won the decision not to prosecute due to insufficient evidence. . One year after the "924" notice was issued and fermented, starting from the second half of 2022, currency circle criminal cases have ushered in the 3.0 era, with more investigation companies than project parties. As the saying goes, "the currency circle dies in the currency circle." , coupled with the introduction of new judicial interpretations of illegal fund-raising, the application of the law is constantly being broken, and the connection between executions and case handling has left little room for innocence defense. Of course, this is also related to the cases I represent, including project parties, exchanges, and hackers. Coin theft and job-related crimes in the currency circle are the main crimes, and some traditional cases such as trusting, concealing, and non-trusting have long been discontinued.

I have always believed that the role of a lawyer is to assist the client in finding the best solution, and that the client’s freedom should not be sacrificed for the sake of innocent defense. In the 3.0 era of criminal cases in the currency circle, no matter how many complaints lawyers have, no matter how much they want to complain (I will write a special article later so that this somewhat technical article can survive), we should still fight for the rights and interests of the parties within the legal framework. If If there is no room for a crime, then we should actively seek the benefits of property punishment, so I summarized this article, which is the opinion of many cases that I have represented in many places and has been adopted by the procuratorate and the court. I hope it can be helpful for the handling of currency-related cases. helped.

1. Legal basis (people in the circle can skip this part directly)

my country's criminal law and criminal procedure law do not clearly stipulate whether the reasonable costs of crimes should be deducted. However, through relevant legal documents, we believe that in the application process of some crimes, illegal gains should be accurately calculated and the "profit theory" should be adopted. For reasonable costs, Costs, deductions for deductions, deductions for deductions.

1. The crime of illegal business operations. According to the "Research Opinions of the Research Office of the Supreme People's Court on the Identification of "Illegal Gains" in the Crime of Illegal Business", relevant departments solicited opinions from the Research Office of the Supreme People's Court on the issue of the identification of "illegal gains" in the crime of illegal business. The research office of the Supreme People's Court believes that "illegal gains" in the crime of illegal business should refer to the amount of profit, that is, all the income obtained by the perpetrator from illegally producing and selling goods or providing services (i.e., the amount of illegal business) , the remaining amount after deducting the portion of reasonable expenditures directly used for operating activities.”

2. The crime of illegally absorbing deposits from the public. According to the new judicial interpretation of illegal fund-raising, the amount of fund-raising fraud... advertising fees, intermediary fees, handling fees, kickbacks paid by the perpetrator to carry out fund-raising fraud activities, or used for bribes, gifts, etc., shall not be deducted. We believe that this judicial interpretation focuses on prohibiting the deduction of reasonable expenses for the crime of fund-raising fraud. From another perspective, it should be considered that reasonable expenses for the crime of illegally absorbing public deposits should be deducted. Of course, the bribery, Expenses such as gifts are difficult to consider as reasonable expenses.

3. Other judicial interpretations supporting the "profit theory" of illegal gains: First, the Supreme People's Court issued a reply to the Hubei Provincial Higher People's Court in 1995 on "How to Determine the "Amount of Illegal Gains" in Criminal Cases of Producing and Selling Counterfeit and Substandard Products" "Clearly: "The 'amount of illegal income' stipulated in the "Decision of the Standing Committee of the National People's Congress on Punishing the Crime of Producing and Selling Counterfeit and Substandard Products" refers to the amount of profits made from the production and sale of counterfeit and shoddy products." Second, Article 17 of the "Interpretation on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Publications" issued by the Supreme People's Court in 1998 clearly states: "The 'amount of illegal income' referred to in this interpretation refers to the amount of profit." Third, Article 10 of the "Interpretations on Several Issues Concerning the Specific Application of Laws in Criminal Cases of Handling Insider Trading and Leaking Insider Information" issued by the Supreme People's Court and the Supreme People's Procuratorate in 2012 clearly states: "...illegal gains refer to those obtained through insider trading activities." Profit gained or loss avoided.” (Excerpt from online)

4. MLM cases are a common crime in the currency circle, but based on the author’s experience in handling such cases, the defendants are held accountable based on the amount involved, so the issues mentioned in this article are not involved.

2. Reduction of illegal income

1. Repurchase. Based on compliance with the provisions of the white paper or in order to stabilize the currency price, project parties usually promise to repurchase at a percentage of the profit. From the user's perspective, whether it is to reduce handling fees or to hold the currency to earn interest, the act of holding the currency It is necessary, so the defender believes that although this part of the profit was briefly obtained, it was immediately spent and should be deducted from the illegal income. (Of course, in actual defense, this part still needs to be discussed in detail in order to be adopted by the judicial authorities, the same below)

2. Destroy. In essence, it is similar to repurchase. You can understand it without going into too much detail. Common deflation methods are designed to maintain currency prices. Some of them have been written into the contract. In short, the project party cannot obtain this benefit at all. It should be deducted from the illegal income.

3. Commission rebate. To a certain extent, rebates are of an advertising nature and should be deducted from reasonable expenditures. However, in terms of common operations in the industry, rebates are also stated through procedures and mechanisms. The exchange cannot obtain this benefit and should be included in illegal gains. Nuclear reduction.

4. Pledge. In the new judicial interpretation of illegal fund-raising, the act of "virtual currency trading" has been added. However, not all virtual currency transactions constitute non-attracting. From the perspective of the four characteristics of "non-attracting", the currency circle is deemed to be non-attracting and "inducement and inducement". "Practice" is the most critical. Some projects only promise benefits if they are pledged. Therefore, the calculation of illegal income should be based on the pledged amount, and everything else should be reduced.

3. Deduction of reasonable costs

1. Labor costs. In any project, labor costs account for a large part of the cost expenditure, so it is of great significance to strive for the deduction of this part. There are many existing cases proving that in non-abuse and business crimes, the deduction of labor costs has been obtained. Support indicates that in related criminal activities, labor costs are indeed reasonable and necessary expenditures, including wages, social security, provident funds, year-end bonuses, etc. In practice, project dividends are often difficult to obtain support.

2. Housing rental costs. Like labor costs, house rental costs are also reasonable and necessary expenses for the project. Once paid, they are lost forever. Therefore, when calculating illegal income, house rental costs are also a part that should be deducted.

3. Service fees. The service fee covers a wide range of content, mainly including servers, tools, SMS, and other categories. Commonly used servers include Alibaba Cloud, Yunpian.com AWS, Clouldflarle, etc., which are the core equipment that supports the operation of the exchange. Therefore, The cost of renting a server should be deducted. In addition, SMS services are also essential for the interaction between the exchange and users. In addition, necessary tools include Zendesk, Travis, Google, Ipinfo, Coveralls, Github, Crowdin, etc.

4. Purchase mining machines and pledge coins. Some projects, such as computing power mining, pledge mining, etc., require the purchase of a large amount of mining equipment, and some require a mining machine + pledge currency model to produce coins. In this case, the project party must purchase equipment in order to operate normally. and pledged coins are necessary expenses, so this part of the expenses should be deducted.

5. Marketing advertising and public relations expenses. If a project wants to gain popularity and visibility, it needs to invest a lot of advertising expenditures, including project public relations expenses, etc., to attract users to participate. Therefore, this expenditure should be considered reasonable and necessary expenditure.

6. Intermediary service fees. Mainly refers to related work completed by third-party companies, such as security audits, KYC certification, outsourcing services, etc.

7. Office costs. In order to maintain the normal operation of the project, large office costs are required, such as computers and other hardware equipment, house decoration and design, electricity bills, etc. In practice, some judicial authorities do not adopt this opinion on the grounds that although expenditures have been made on hardware equipment, house decoration, etc., they have not been lost. When it comes to mining projects, electricity expenses account for a large proportion, and the possibility of adoption by judicial authorities is higher.

8. Based on the necessary foreign investment for the project. Foreign investment can also be understood as advertising expenditures, but in practice judicial authorities often do not adopt this approach.

4. Other issues that should be noted

1. Whether it is the reduction of illegal income or the deduction of reasonable costs, it needs to be supported by objective evidence. Regarding the understanding of evidence, it is recommended to communicate with judicial authorities more about evidence standards.

2. When calculating illegal gains and reasonable costs, since legal currency and virtual currency are involved, and legal currency involves RMB and foreign currencies. In addition, the exchange rate has fluctuated greatly in just over half a year. As a lawyer, you should propose a plan that is more beneficial to the client and persuade the judicial authorities to support it. For example, the exchange rate of RMB against the US dollar differs from the lowest price displayed on different official websites. Therefore, the official website price that is most beneficial to the parties must be submitted to the judicial authorities.

3. When disposing of virtual digital currency, focus on whether the OTC price has a positive or negative premium to the RMB exchange rate, and choose a favorable disposal method. When settling foreign exchange for overseas disposal and returning to the country, you can strive for a higher price based on the foreign exchange quotation, but the calculation will basically be based on the foreign exchange purchase price.

4. The law is lagging and limited, and is applied by specific case handlers. Especially when fighting for property rights in cases of guilty plea and punishment, lawyers must do errands frequently, communicate frequently, and come up with well-founded plans in order to obtain the greatest possible benefit for the parties. rights and interests.

I always want to talk about something more, maybe later.


About the Author

Liu Yang

2022

LEGALBAND Recommended

Top 15 Digital Economy Lawyers

Deputy Secretary-General of the National Criminal Commission of Beijing Deheng Law Firm, Master of Software Engineering from Peking University, and has been engaged in legal work such as public security and lawyer for fifteen years. Focusing on criminal business in the subdivided areas where network, blockchain and digital technology are intertwined with finance, he is a data security consulting expert of the National Engineering Laboratory of Cybersecurity Emergency Technology and deputy secretary-general of the Cyberspace Security and Legal Affairs Committee of the Beijing Computer Society. Contact information: 13581751329.

Lawyer Liu Yang’s team members at Beijing Deheng Law Firm generally have many years of practical background in judicial agencies, continue to pay attention to the pan-crypto field, and are good at representing currency-related fraud with certain justifications, illegal fund-raising, organization and leadership of pyramid schemes, illegal use of information networks, and assistance with information networks. Criminal defense in criminal activity cases, currency-related civil and commercial arbitration, industry compliance and corporate governance in emerging fields such as Yuanverse, NFT, and web3.0.

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