With USDT and other virtual currencies being increasingly used by criminal groups to transfer and conceal illicit funds, many trading users may receive various illicit funds when withdrawing. More seriously, this may involve criminal risks such as assistance to crime. Today, the author discusses why cryptocurrency trading users easily involve assistance to crimes during withdrawals from the perspective of OTC business and in combination with cases.
1. Two common withdrawal methods and business processes
The common withdrawal methods for ordinary users mainly include withdrawing through centralized exchanges like Binance, OKX (OKX), and off-exchange transactions. The main difference between the two is whether they go through the exchange as an intermediary.
(1) Exchange withdrawal
The above figure clearly shows that in the OTC business of exchanges, the buying and selling parties are users and OTC merchants, with the exchange providing transaction matching and ensuring transaction safety. Users and merchants receive transaction order information on the platform and transfer funds off-exchange through bank cards, Alipay, WeChat, etc., with trading users receiving RMB from merchants, while the transaction target, USDT and other virtual currencies, is akin to being transferred from the trading platform's user account to the merchant's account.
To reduce the risk of users receiving RMB from merchants during withdrawals, exchanges impose entry barriers on OTC merchants on the platform. To become an OTC merchant on the exchange, one must undergo real-name authentication, meet certain transaction volume and amount requirements, and freeze a certain amount of USDT as a deposit in their account. If non-real-name cards are used for payment or if there are irregularities such as guiding users to engage in transactions on other third-party platforms, customer service may intervene, and the risk control compliance department may penalize the merchant by suspending their account or deducting their deposit.
To become an OTC merchant on Binance, in addition to the usual certification requirements, one must also lock in a deposit of 15,000 USDT. Merchants claiming to freeze the refundable deposit need to lock in 30,000 USDT.
In actual OTC business operations, Binance will monitor merchants. For instance, if a user’s withdrawal is frozen and the merchant fails to provide bank statements or if there are abnormal risk control detections, or if the merchant does not cooperate with investigations, such violations may lead to the merchant being prohibited from trading or losing eligibility.
If a merchant uses the platform to commit fraud, money laundering, or other illegal activities, or if false materials are provided during the freezing and verification process, the platform has the right to deduct the entire deposit from the merchant's account.
From the above provisions, it can be seen that the platform monitors merchants in various ways, helping trading users reduce withdrawal risks and combat crimes using exchanges' OTC services. Once card freezing occurs during withdrawals, the platform will also coordinate merchants to help resolve issues.
(2) Off-exchange withdrawal (high risk)
In addition to the OTC withdrawal from the exchange, some trading users use WeChat groups, TG groups, and various social media to contact buyers for off-exchange transactions. As shown in the above figure, buyers contacted through various off-exchange methods have not been certified by the platform and lack professional risk control measures. As a trading user, you do not know what the USDT buyers who transfer money to you are doing, where their funds come from, and the situation is one of unknown funding sources and unverifiable identities.
The trading counterpart you meet in cryptocurrency groups or Douyin live broadcasts may very well be suspects in fraud, money laundering, or gambling cases, transferring illicit funds into your bank card in exchange for USDT to evade investigations by the public security authorities, thus transferring criminal risks to you.
Moreover, some trading users mistakenly believe that using offline cash payments can evade the risk of card freezing. Although this method may increase the difficulty of investigation for public security authorities, if such abnormal trading behaviors are discovered, and the true transaction cannot be restored during the investigation, it may pose even greater criminal risks for these users.
2. Why cryptocurrency deposits and withdrawals easily involve assistance to crime
Article 287 of the Criminal Law stipulates that if someone is aware that others are using information networks to commit crimes and provides technical support such as internet access, server hosting, network storage, or communication transmission, or provides advertising, promotion, or payment settlement assistance, if the circumstances are serious, they may be sentenced to imprisonment of less than three years or criminal detention, and may also be fined.
The key to determining whether someone has assisted in a crime is whether they are aware that others are using information networks to commit crimes. The (Supreme People's Court and Supreme People's Procuratorate's Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Illegal Use of Information Networks and Assisting in Information Network Crimes) (hereinafter referred to as "Interpretation") Article 11 clearly states that for those providing technical support or assistance for others to commit crimes, if any of the following circumstances are present, it can be recognized that the actor is aware that others are using information networks to commit crimes, unless there is contrary evidence:
(1) Continuing to engage in relevant behaviors after being informed by regulatory authorities;
(2) Failing to fulfill statutory management responsibilities after receiving reports;
(3) Transactions with significantly abnormal prices or methods;
(4) Providing specialized programs, tools, or other technical support or assistance for illegal activities;
(5) Frequently employing covert internet access, encrypted communication, data destruction, or using false identities to evade regulation or investigation;
(6) Providing technical support or assistance for others to evade regulation or investigation;
(7) Other circumstances sufficient to determine that the actor is aware.
The third point in the above (Interpretation) mentions that "transaction prices or methods are obviously abnormal" will be recognized as the actor being aware. In judicial practice, if off-exchange trading is used during withdrawals and the transaction price significantly deviates from the OTC market price or payment is made using cash methods not commonly used by ordinary trading users, some local public security authorities may consider it to constitute subjective awareness.
Therefore, the author mentioned above that off-exchange transactions using cash payments are superficially more discreet and may reduce the likelihood of card freezing. However, if discovered during the public security investigation, it may be deemed as knowing, thus increasing the criminal risk of constituting assistance to the crime. When it comes to trading prices, do not engage in off-exchange transactions with netizens just to gain an advantage; if the price deviation from the market is too large, it may also be recognized as knowing by the public security authorities.
Due to domestic regulatory reasons, cryptocurrency trading users often use Twitter X, TG groups, and other social media to gather industry information and exchange trading information with group friends. Chat records in TG can be directly deleted locally, and some trading users will meet friends through TG trading groups and complete OTC transactions directly there. If they receive funds from unknown sources and their cards are frozen, being investigated by public security authorities, using TG may be deemed as encrypted communication due to its destructible chat records, falling under point 5 of Article 11 in (Interpretation), thus being recognized as aware. Additionally, some trading users may use purchased KYC registered accounts for trading, which may also be recognized as using false identities to evade regulation or investigation, according to point 5 of (Interpretation).
In addition, the Third Criminal Tribunal of the Supreme People's Court, the Fourth Prosecution Office of the Supreme People's Procuratorate, and the Criminal Investigation Bureau of the Ministry of Public Security (regarding the meeting minutes on legal applicability issues in the "Card Disconnection" operation) (hereinafter referred to as the "Meeting Minutes") stipulate that in determining whether an actor is "aware" of others using information networks to commit crimes, the principle of consistency between subjective and objective standards should be adhered to. This means that a comprehensive assessment should be made by combining the actor’s cognitive ability, prior experience, trading partners, relationship with the information network crime actors, the time and method of providing technical support or assistance, profit situation, number of times and instances of renting or selling "two cards", and the actor’s testimony, while also paying attention to the actor's defense and evaluating its reasonableness.
Therefore, the author mentioned above that off-exchange transactions using cash payments are superficially more discreet and may reduce the likelihood of card freezing. However, if discovered during the public security investigation, it may be deemed as knowing, thus increasing the criminal risk of constituting assistance to the crime. When it comes to trading prices, do not engage in off-exchange transactions with netizens just to gain an advantage; if the price deviation from the market is too large, it may also be recognized as knowing by the public security authorities.
Due to domestic regulatory reasons, cryptocurrency trading users often use Twitter X, TG groups, and other social media to gather industry information and exchange trading information with group friends. Chat records in TG can be directly deleted locally, and some trading users will meet friends through TG trading groups and complete OTC transactions directly there. If they receive funds from unknown sources and their cards are frozen, being investigated by public security authorities, using TG may be deemed as encrypted communication due to its destructible chat records, falling under point 5 of Article 11 in (Interpretation), thus being recognized as aware. Additionally, some trading users may use purchased KYC registered accounts for trading, which may also be recognized as using false identities to evade regulation or investigation, according to point 5 of (Interpretation).
In addition, the Third Criminal Tribunal of the Supreme People's Court, the Fourth Prosecution Office of the Supreme People's Procuratorate, and the Criminal Investigation Bureau of the Ministry of Public Security (regarding the meeting minutes on legal applicability issues in the "Card Disconnection" operation) (hereinafter referred to as the "Meeting Minutes") stipulate that in determining whether an actor is "aware" of others using information networks to commit crimes, the principle of consistency between subjective and objective standards should be adhered to. This means that a comprehensive assessment should be made by combining the actor’s cognitive ability, prior experience, trading partners, relationship with the information network crime actors, the time and method of providing technical support or assistance, profit situation, number of times and instances of renting or selling "two cards", and the actor’s testimony, while also paying attention to the actor's defense and evaluating its reasonableness.
3. Cases of constituting assistance to the crime in cryptocurrency withdrawal and deposit
Case 1, Case Number: (2024) Min 0821 Criminal Initial 128
From October 2021 to April 2022, defendant Shi, using three bank accounts under his name, three under Zeng's name, and five provided by Cai, knowingly assisted others in committing crimes using information networks to obtain illegal profits by providing payment settlement services through buying and selling virtual currencies. Statistics show that the payment settlement amount through the above bank accounts reached over 20.88 million yuan. According to the National Anti-Fraud Big Data Platform, the funds are associated with fraud-related primary card funds of 53,999 yuan. Defendant Shi illegally profited over 60,000 yuan from this.
It was further discovered that 1. The two defendants sold USDT on the trading platform to counterparts named "Beauty Loves Smoke" and "Lü Bing" (identity to be verified); 2. According to the National Anti-Fraud Big Data Platform, the fraudulent funds involved, totaling 53,999 yuan, flowed into a primary account and were then mixed with other unknown nature funds of secondary and tertiary accounts, eventually circulating to a fourth-level account, which is the bank account of Chen Moumou involved in the case.
The court held that after the defendant announced on September 24, 2021 (regarding further prevention and handling of risks in virtual currency trading speculation), which explicitly prohibits related illegal financial activities, they still engaged in selling virtual currency at high prices to specific counterparts and profiting from price differentials that significantly deviated from market trading norms, forming a long-term and stable cooperation model with the other party. They should be recognized as knowing that others were using information networks to commit crimes and providing them with payment settlement assistance; the amounts of payment settlement provided by both defendants exceeded 1 million yuan, reaching 20.88 million yuan and over 3.155 million yuan, which constitute serious circumstances, forming guilty of assisting information network crime activities.
In this case, the reason the two defendants were recognized as aware is primarily due to their high-priced sale of USDT to specific trading counterparts on the trading platform, obtaining price differentials that significantly deviated from market trading norms. This falls under point three of Article 11 in the above (Interpretation), where transaction prices or methods are obviously abnormal. Normal cryptocurrency withdrawal transactions are conducted by selecting trading counterparts through OTC market prices close to the market price. The trading behavior of the two defendants in this case was clearly different and was recognized by the court as knowing.
Case 2, (2022) Xiang 0281 Criminal Initial 484
Between November 2021 and July 2022, defendants Su, Yi, and others, in pursuit of illegal profits, knowingly registered merchant accounts on the "OKX" platform and bound their bank cards while being aware that others were using the "OKX" network platform to engage in criminal activities. They cooperatively bought low and sold high in virtual currency to help others transfer illegal funds. During this period, the defendants registered platform accounts using the identities of internal studio personnel and used others' bank cards for low buying and high selling of virtual currency to transfer funds. The bank cards used in the process had been frozen before, and according to the National Anti-Fraud Big Data Platform, the bank accounts of Su, Yi, Lei, and Qi were all linked to fraudulent funds.
From October 2021 to March 2022, Yao downloaded software such as "WHDC" and "OKX" as instructed by fraudsters, and was defrauded of over 300,000 yuan by buying coins on "OKX" and transferring to "WHDC" for investment. Some of the funds were directly transferred to the bank accounts of Yi, Lei, and Qi.
The court held that defendant Su began engaging in virtual currency trading speculation and that his bank card had been frozen multiple times due to suspected fraud and other illegal activities. The testimonies of the defendants all confirmed that Su explicitly informed the other defendants before they joined that the "OKX" platform had much dirty money, and that "buying low and selling high" could yield "guaranteed profits," but the bank card might be frozen. In pursuit of illegal profits, the defendants were aware that virtual currency trading speculation was an illegal financial activity, yet they still registered merchant accounts on the "OKX" platform in the form of a "studio," specifically engaging in virtual currency trading, and did not take effective remedial measures when their or others' bank cards experienced abnormalities due to violations or suspected illegal activities. Instead, they continued trading by changing bank cards or platform accounts, which should be recognized as knowing that others were using information networks to commit crimes. Their self-assessed standards for reviewing trading partners and funds do not affect the qualitative nature of their actions and can only be considered as determining factors for subjective malice.
Although this case is controversial, we can conclude that in judicial practice, under abnormal circumstances where bank cards have been frozen multiple times due to fraud-related illegal activities, failure to take effective remedial measures to explain the situation to public security authorities, engage in unfreezing actions, etc., but instead replacing bank cards and accounts to continue trading, should be classified under points 2, 3, and 4 mentioned in the above (Meeting Minutes), constituting knowledge.
3. Lawyer's Recommendations
1. Ordinary trading users should try to use centralized exchanges for OTC trading
Centralized exchanges have strict review, post-penalty, and anti-money laundering risk control measures for OTC trading counterparties, especially merchants. Once issues arise, the exchange can coordinate all parties to provide materials and cooperate with regulatory investigations, which can reduce the criminal risks for ordinary users. To minimize the risk of being defrauded during transactions, it is advisable to avoid civil disputes arising from OTC trading.
2. When conducting deposit and withdrawal transactions, avoid cash payments, abnormal trading prices, and unusual situations in communication via TG or other encrypted chat software.
Conducting OTC trading off-exchange using cash payments, significantly deviating from market prices, and using encrypted chat software for communication, once card freezing occurs and public security intervenes, may result in being unable to restore the true transaction facts and be recognized as having knowledge of the aforementioned legal provisions, constituting assistance to the crime.
3. Refusing funds deposited from non-personally real-name bank cards during OTC trading
Ordinary trading users often encounter merchants claiming bank card limits and asking to use someone else's card for payment. When faced with such situations, one must decisively refuse and report to the platform's customer service. Merchants using this method are likely to deposit illicit funds into your card, greatly increasing the risk of card freezing and criminal liability.
When withdrawing funds, try to choose trading counterparts with a registration time of over a year and transaction prices near the market price to reduce the risk of encountering bad merchants.
4. Efforts should be made to address frozen withdrawals
If the withdrawal is frozen, you can wait for a while to determine whether it is a risk control freeze. Then, contact the bank to find out the reason for the freeze. If it is a judicial freeze, please try to contact the freezing authority to understand the situation and provide materials as required to restore the transaction facts for unfreezing. Avoid delays, as the frozen funds may be deducted by court judgment, causing financial losses. Refer to previous articles for unfreezing guidance.Cryptocurrency Unfreezing (1) Bank Card Unfreezing Process,Cryptocurrency Unfreezing (2) Legal Basis for Freezing and Unfreezing .