Recently, the Jiangsu Province Jianhu County People's Procuratorate announced a case involving cross-border foreign exchange trading mediated by virtual currency, attracting widespread attention. Three 'post-95' individuals were found to have engaged in disguised foreign exchange trading by using virtual currency to bypass national foreign exchange supervision, and were ultimately sentenced to prison terms ranging from five years to one year and six months, along with fines.
Case Review: Virtual Currency 'Arbitrage' in Foreign Exchange Trading
In early 2020, 25-year-old Lin began to get involved in virtual currency 'arbitrage' due to a lack of stable income. He earned meager profits by exploiting price differences between two exchanges. However, a chance transaction led him to meet a Nigerian client who proposed using Lin to exchange naira for RMB.
Lin designed a set of operational plans: the client would use naira to purchase Tether (USDT) on the Binance exchange, Lin would sell the USDT to domestic currency dealers for RMB, and then transfer the money to the client's designated account, earning the price difference. The first transaction netted Lin a profit of 300 yuan, leading him to believe this was an easy way to get rich.
In September 2020, Lin and his friend Yan quit their jobs to go solo. Soon after, due to the frequent inflow of large sums into their accounts, they were restricted from use. They then invited Xie to join them, providing a bank card and participating in operations. Within just a few months, the three completed over 650 transactions, exchanging nearly 30 million yuan in foreign currency.
Qualifying the Case and Judgment
In June 2022, Lin and the other two were arrested by the police. After the prosecution intervened, they determined through detailed funds flow and transaction records that the trio used virtual currencies to bypass foreign exchange supervision for cross-border payments, disrupting the order of the financial market.
The court ultimately determined that Lin and the other two engaged in cross-border exchange services using virtual currency, evading national foreign exchange management, constituting illegal business operations. On April 29, 2024, the court sentenced Lin and Yan to five years in prison each, with fines; Xie was sentenced to one year and six months, receiving probation and a fine.
Case Warning: Risks of Arbitraging with Virtual Currencies
Legal Arbitrage or Illegal Business?
Lin and others argued that they were just 'ordinary arbitragers,' but the court determined that their actions involved cross-border payments and foreign exchange trading, evading supervision and disrupting financial order. This case reveals the close connection between virtual currency arbitrage activities and legal risks.
Risks of Virtual Currency and Foreign Exchange Trading
Due to its decentralized nature, virtual currency has been exploited by criminals to evade supervision. In this case, virtual currency became a tool to bypass foreign exchange regulation, leading to illegal gains.
Investment Warnings Under Legal Pressure
This case reminds investors: although virtual currency trading is not completely prohibited, once it involves evading foreign exchange management and other behaviors, it may violate the law and even lead to criminal liability.
Recommendations from the Prosecution
1. Clarify legal boundaries. The foreign exchange management and payment behaviors involved in virtual currency trading need clear regulatory boundaries to enhance public awareness of the law.
2. Strengthen financial supervision and publicity. Relevant departments should increase publicity efforts to guide the public to invest legally, avoiding virtual currencies becoming tools for illegal activities.
Is it worth taking such a huge risk to trade virtual currencies while circumventing regulations? Does the legality of virtual currency trading need further clarification? Feel free to leave a comment for discussion!
