In early 2020, 25-year-old Lin, due to his low education level, had not found a suitable job. At that time, the virtual currency market was booming, and he learned online that many people became rich overnight by trading coins, so he also wanted to use virtual currency to turn his fortunes around. Later, introduced by a friend, he and his high school classmate Yan started doing virtual currency 'arbitrage' in a local studio.
The so-called virtual currency 'arbitrage' is actually a virtual currency trading model where they buy and sell virtual currency on different exchanges to earn price differences. At that time, Lin was only engaged in pure virtual currency 'arbitrage' until August 10, 2020, when he accidentally met a Nigerian with the WeChat nickname 'Prince' during a transaction. After adding each other's WeChat, 'Prince' said that the costs of buying and selling foreign exchange at banks or foreign exchange companies were high and wanted Lin to exchange the local currency Naira for RMB.
How can one operate to bypass foreign exchange regulations to exchange Naira for RMB? Lin soon thought of a perfect plan: 'Prince' buys Tether at the local exchange using the domestic currency Naira, then transfers it to Lin's exchange account. Lin sells the Tether to domestic currency dealers for RMB and then transfers it to the Chinese bank account provided by 'Prince'. Lin determines the purchase price based on the Tether's listed price that day, applying a 5% discount, and then sells it to domestic currency dealers at the listed price to earn a profit. The whole process requires only simple operations and communication, without needing to advance funds, allowing one to 'fish with empty hands'. The first transaction was completed in half an hour, earning 300 yuan, which made Lin taste the sweetness and believe this was a path to wealth.
In September 2020, Lin and Yan decided to resign and go solo. They bought a work phone and registered a work WeChat account specifically to contact Nigerian clients, domestic currency dealers, and conduct virtual currency trading operations. In January 2021, Lin and Yan's bank accounts were restricted from trading due to frequent large fund inflows, so they brought in their classmate Xie to join and had Xie provide a bank card to receive funds.
'At that time, I had a formal job, but my income was not high and I often found myself short on money. I heard them say that this made money quickly and had flexible hours, so I could do it in my spare time, so I agreed. I didn't expect this to be a crime.' After the incident, Xie regretted it deeply. Soon, Xie learned the basic operations from Lin, and the three began to take turns operating, with one responsible for a week, operating for less than two hours a day. They made the foreign exchange 'business' thrive.
On June 17, 2022, the three were captured by public security police at their homes. In October 2022, the Jianhu County Procuratorate intervened according to law, collaborating with public security agencies to analyze the nature of the case, actively guiding the tracking of cross-border capital chains, and urging public security to timely retrieve evidence such as recharge and withdrawal transaction records from foreign virtual currency trading platforms, suspect WeChat chat records, and bank account transaction details.
Investigations revealed that from September 2020 to January 2021, Lin and Yan covertly traded foreign exchange worth over 21.29 million yuan. From January to April 2021, after Xie joined, the three covertly traded foreign exchange worth over 8.38 million yuan. 'Covert foreign exchange trading seems to have no physical flow between RMB and foreign exchange, but it actually bypasses our foreign exchange regulations, affects the stability of our financial market, and leads to inaccurate economic data held by the state, impacting financial decisions such as exchange rates and foreign exchange reserve adjustments, posing significant harm,' the prosecuting attorney told reporters.
On January 26, 2024, the case was transferred to the procuratorial organ for review and prosecution. 'I didn't know that Tether's source was Nigeria; I only engaged in ordinary virtual currency 'arbitrage' to earn price differences, which is a legal arbitrage behavior and does not constitute a crime,' Lin said in the interrogation room.
Faced with Lin's sophistry, the prosecuting attorney compared domestic and foreign transaction records, extracted chat records related to foreign exchange conversion, and testimonies from domestic payees related to conversion records. They clarified the conversion process of the involved funds, the crime amount, and the suspects' understanding of the source and nature of virtual currency. In front of a tight evidence chain, Lin finally admitted that he knew Tether was used by Nigerians to pay domestic payees and confessed to his crime.
The prosecutor's review found that Lin and the other two used virtual currency as a medium to provide cross-border exchange and payment services for profit from exchange rate differences, which utilized the special properties of virtual currency to bypass national foreign exchange regulations, affecting the effectiveness of foreign exchange management and the stability of legal exchange rates, disrupting the normal order of the financial market, and they should be held criminally responsible for illegal business operations according to law.
On February 26, the Jianhu County Procuratorate filed charges against Lin and the other two for illegal business operations, and proposed sentencing suggestions based on the facts and circumstances of their crimes. On April 29, the court accepted the prosecutorial organ's charges and sentencing suggestions after trial, sentencing Lin and Yan to five years in prison, each with a fine; sentencing Xie to one year and six months in prison with probation, along with a fine. None of the three appealed, and the judgment has taken effect.
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