Recently, the Jiangsu Province Jianhu County People's Procuratorate announced a case involving cross-border foreign exchange trading through virtual currency, attracting widespread attention. Three 'post-95' youths were found to have used virtual currency to bypass national foreign exchange regulations, engaging in disguised foreign exchange trading, and were convicted of illegal business operations, ultimately sentenced to prison terms ranging from five years to one year and six months, with fines.
Case review: Virtual currency 'arbitrage' into foreign exchange trading
At the beginning of 2020, 25-year-old Lin, without a stable income, began engaging in virtual currency 'arbitrage'. He earned meager profits by exploiting price differences between two exchanges. However, a chance transaction led him to meet a Nigerian client who proposed exchanging Naira for RMB through Lin.
Lin designed an operational plan: customers purchase Tether (USDT) using Naira on the Binance exchange, Lin sells USDT to domestic currency traders for RMB, then transfers the money to the customer's designated account, earning the price difference. The initial transaction earned Lin 300 yuan, and he believed this was an easy way to get rich.
In September 2020, Lin and his friend Yan quit their jobs to work independently. Soon after, due to frequent inflows of large amounts of money into their accounts being restricted, they invited Xie to join, providing a bank card and participating in operations. In just a few months, the three completed over 650 transactions, exchanging nearly 30 million yuan in foreign currency.
Qualifying and ruling of the case
In June 2022, Lin and the other two were arrested by the police. After the prosecution intervened, they uncovered through detailed funds flow and transaction records that they were using virtual currency to bypass foreign exchange regulation for cross-border payments, disrupting the financial market order.
The court ultimately ruled that Lin and two others engaged in cross-border exchange services using virtual currency, evading national foreign exchange management, constituting the crime of 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, with probation, and fined.
Case warning: Risks of virtual currency arbitrage
Legal arbitrage or illegal business?
Lin and others argued that they were merely 'ordinary arbitrageurs', but the court determined that their actions involved cross-border payments and foreign exchange trading, evading regulation 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 is exploited by criminals to evade regulation. In this case, virtual currency became a tool for circumventing foreign exchange regulation, leading to the generation of illegal gains.
Investment warnings under legal pressure
This case reminds investors: although virtual currency trading has not been completely banned, once it involves evading foreign exchange management, it may violate the law and even lead to criminal liability.
Prosecution's recommendations
1. Clarify legal boundaries. The foreign exchange management and payment activities involved in virtual currency transactions require clear legal boundaries to enhance public awareness of the law.
2. Strengthen financial regulation and publicity. Relevant departments should increase publicity efforts to guide the public to invest legally and avoid virtual currency becoming a tool for illegal activities.
Is it worth taking such a huge risk to trade in virtual currency? Does the legality of virtual currency trading need further clarification? Feel free to leave a comment for discussion!