In the process of OTC buying and selling U in the virtual currency circle, receiving funds of unknown origin often leads to frozen cards, and more serious cases may involve criminal offenses. In criminal cases involving withdrawals, common charges include the crime of concealing, hiding criminal proceeds, and their generated benefits.
The crime of concealment protects the legal interests of judicial order and financial management order. If criminal funds from upstream are transferred to accounts during the process of selling U and withdrawing money, it is equivalent to helping the criminal group transfer stolen funds, which can easily constitute this crime.
1. Under what circumstances will it constitute the crime of concealment?
(Criminal Law) Article 312, Paragraph 1 states that if one conceals, transfers, purchases, sells, or in other ways conceals or hides criminal proceeds and their generated benefits, knowing they are criminal proceeds, they shall be sentenced to imprisonment of up to three years, criminal detention, or control, and may also be fined or solely fined; if the circumstances are serious, they shall be sentenced to imprisonment of more than three years but less than seven years, and also be fined.
The Supreme Court (Interpretation on Several Issues Concerning the Application of Law in the Criminal Cases of Concealing, Hiding Criminal Proceeds and Their Generated Benefits) Article 3 states that if the total value of the concealed criminal proceeds and their generated benefits reaches over 100,000 RMB, it constitutes a serious circumstance, and the punishment is 3–7 years. The total value of the benefits here refers to the transaction flow, which can easily constitute a serious circumstance in the context of U trading in the virtual currency circle.
In judicial practice, the determination of the subjective awareness of the crime of concealing is mainly based on the cognitive ability of the actor, whether there have been previous records of freezing or stopping payments, whether anonymous chat software was used during the transaction, whether the transaction price was significantly different from the market price, whether the earnings were abnormal, whether over-the-counter trading was employed, whether multiple accounts not belonging to the person were used, and whether cash deposits and withdrawals were used to evade investigation.
2. Cases where trading USDT in the cryptocurrency circle constitutes the crime of concealment.
Case 1: For the criminal gang to liquidate stolen coins.
Case Number: (2024) Chuan 0802 Criminal First Instance No. 154.
In early January 2023, defendant Zhu conspired with Deng and others, using Trojan links and 'fake wallet' apps developed by technical staff, under the guise of exchanging JD E-cards for USDT, to deceive others into authorizing their wallet addresses and then stealing USDT.
This group mainly sought victims who were interested in exchanging USDT for JD E-cards through WeChat groups, QQ groups, and other channels. After gaining the victims' trust, they made the victims click on the Trojan link they sent to obtain the customers' wallet address authorization, or made the customers download either 'MaiZi' or 'imtoken', any one of the fake wallets, then used the pretext of having a large number of JD E-cards for recycling to make the victims prepare a large amount of USDT to deposit into the wallet. At this point, the mnemonic phrase and private key of the victim's wallet had already been obtained by the group. Once the USDT in the victim's wallet reached a certain threshold, Zhu and the technical staff transferred the victim's USDT to a designated wallet address through the backend.
The defendant Du is responsible for converting the stolen USDT into cash through over-the-counter (OTC) exchanges and handing it over to Zhu.
Ultimately, the theft actions of Zhu and others constituted the crime of illegally obtaining computer information system data and theft, which were imagined concurrent offenses constituting theft, and they were sentenced to ten years in prison. Du was convicted of the crime of concealing and hiding criminal proceeds and sentenced to seven months in prison with a one-year probation.
Lawyer's Analysis:
The theft of virtual currency in this case has been ongoing for the past few years, mainly taking advantage of the strict regulation of virtual currencies in China, making it difficult to download various wallet and exchange apps through application stores or official websites. The criminal group seized the opportunity to send links for downloading fake imtoken, TP wallet apps that can obtain users' wallet mnemonic phrases and private keys, as well as fake Binance and OKEx exchange apps that can replace withdrawal addresses to the victims. When the victims deposit funds to buy USDT and transfer it to newly created wallet addresses, the developers access the private keys and mnemonic phrases through the backend and transfer the deposited USDT away.
Zhu resold the stolen USDT for cash, and after Du received the cash from selling the stolen USDT, he handed it over to Zhu. Du knew that the cash was obtained from Zhu and others' theft of USDT, and helped convert it into cash for transfer, ultimately being convicted of the concealment crime.
Moreover, this case serves as a reminder to everyone to be cautious about wallets and exchange apps downloaded from unofficial channels, as well as links sent by strangers. Virtual currencies are exploited by many criminal groups due to their decentralized nature, using various gimmicks to deceive novice investors into converting fiat currency into USDT, and then taking advantage of the technical barriers and information asymmetry to claim the USDT in the investors' hands. Once scammed and have their coins stolen, investors face weak regulatory protection, difficulty in filing cases, and challenges in follow-up loss recovery, leading to significant property losses.
Case 2: OTC merchants trading with fixed parties on third-party platforms.
Case Number: (2021) Min 0581 Criminal First Instance No. 645.
Between April and May 2020, the defendant Yang operated virtual currency buying and selling through a virtual currency trading platform, purchasing USDT from 'Huobi' and then reselling it at a markup on other platforms, while trading with relatively fixed counter parties. Yang was aware that during the process of buying and selling virtual currencies, he would actually assist others in transferring criminal proceeds, and despite his account having been frozen, he continued to use multiple Alipay accounts in his name or controlled by him to conduct virtual currency transactions. Within a short period, he received and transferred a total of 7,132,292 RMB of other people's criminal proceeds through 'buying and selling currencies' and profited 15,000 RMB from the price difference. Ultimately, Yang was convicted of the crime of concealing and hiding criminal proceeds and sentenced to three years and two months in prison.
Lawyer's Analysis:
The defendant Yang bought U on Huobi, transferred it to a third-party platform at a markup to sell, and during the transactions on the third-party platform, he communicated with several fixed buyers offline, then placed orders on the third-party platform for the other party to take. This is clearly inconsistent with the normal situation of coin traders' deposits and withdrawals, which is very abnormal. After Yang's Alipay was frozen, he borrowed multiple Alipay accounts from relatives and friends to continue trading. Combined with Yang's chat records with fixed buyers and his confession, it was ultimately determined that Yang knew he was assisting others in transferring criminal proceeds.
Friends who often trade coins often receive frozen cards when withdrawing money and do not actively contact to inquire about the reasons for the freeze. They continue to borrow cards and accounts from friends to withdraw money. Sometimes they even want to receive payments through cash deposits, which seem to avoid card freezes, but ultimately could become presumed knowledge actions, bringing significant criminal risks. Originally just ordinary coin trading, various abnormal behaviors during withdrawals may lead to being identified as suspects by the public security authorities.
Suggestions for reducing risks in cryptocurrency withdrawal can refer to previous articles (discussing why cryptocurrency withdrawals are prone to aiding crimes through case studies).
3. Does buying and selling U constitute the crime of concealment or aiding?
The differences between the crime of concealment and the crime of aiding mainly lie in the following points:
1. Different standards for determining knowledge.
The determination of knowledge in the crime of concealment requires the actor to be fully aware that the involved funds received are criminal proceeds and their generated benefits, while the knowledge required in the crime of aiding only requires the actor to recognize that the behavior of the person being assisted has a certain illegality, the source of the funds is unclear, and there may be issues.
The knowledge in the crime of concealment is more specific and definite compared to the crime of aiding, relating to upstream criminal funds.
2. Different participation times of the actors.
The legal interest protected by the crime of concealment is judicial order, and the object of the act is the criminal proceeds and their generated benefits. To ensure that judicial authorities are not obstructed or interfered with by the downstream transfer and concealment of criminal funds when exercising public power to investigate cases and recover losses, the establishment of the crime of concealment is premised on the completion of the upstream crime.
The crime of aiding can occur at various stages of committing information network crimes, including assisting in renting servers and building platforms during the preparatory stage, helping with traffic promotion during the commission of the crime, and providing bank card accounts and face verification after the crime has been completed.
3. Different severity in sentencing.
The maximum statutory penalty for the crime of concealment is seven years of fixed-term imprisonment, while the maximum statutory penalty for the crime of aiding is three years of fixed-term imprisonment, which is relatively lighter than the crime of concealment. In cases involving payments and settlements related to buying and selling U, a common strategy is to adopt a defense of light crime to reduce penalties.
This primarily focuses on whether the source of the funds received objectively belongs to criminal proceeds and their generated benefits, and whether the actor has a clear and specific understanding of receiving upstream criminal funds subjectively.
