In early 2020, 25-year-old Lin was unable to find a suitable job due to his low educational level. At that time, the virtual currency market was booming, and he learned online that many people became wealthy overnight by trading cryptocurrencies. He wanted to leverage virtual currency to turn his life around. After being introduced by a friend, he started 'arbitraging' virtual currency with his high school classmate Yan at a local studio.
The so-called virtual currency 'arbitraging' is actually a trading model where they buy and sell virtual currency on different exchange platforms to profit from the price difference. At that time, Lin was engaged in pure virtual currency 'arbitraging' until August 10, 2020, when he accidentally met a Nigerian with the WeChat nickname 'Prince' during a transaction. After adding each other on WeChat, 'Prince' claimed that the fees for buying and selling foreign exchange at banks or forex companies were high, and he wanted Lin to help exchange the local currency Naira for Chinese Yuan.
How could they operate to bypass foreign exchange regulations and exchange Naira for Yuan? Lin quickly thought of a perfect plan: 'Prince' would buy Tether with the local currency Naira at an exchange, then transfer it to Lin's exchange account. Lin would sell the Tether to domestic currency dealers for Yuan and then transfer the money to a bank account provided by 'Prince' in China. Lin determined the purchase price by lowering the listed price of Tether by 5% for that day and then sold it to domestic dealers at the listed price, earning the price difference. The entire process required only simple operations and communication, without needing to advance any funds, allowing them to 'pull off a heist 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 quit their jobs and go solo. They bought a work phone, registered a work WeChat account specifically to contact Nigerian clients, domestic currency dealers, and carry out virtual currency transactions. In January 2021, due to frequent large sums of money flowing into their bank accounts, Lin and Yan's accounts were restricted from transactions, so they invited their classmate Xie to join and let him provide a bank card to receive funds.
"At that time, I had a formal job, but my income was low, and I often found myself short of money. I heard them say this was a quick way to make money, and that it could be done in my spare time, so I agreed. I didn't expect this would be a crime." After the incident, Xie regretted it deeply. Soon, Xie learned the basic operations from Lin, and the three of them began taking turns operating, with one person responsible each week, spending less than two hours a day. They made this foreign exchange 'business' thrive.
On June 17, 2022, the three were arrested by police at their homes. In October 2022, the Jianhu County Prosecutor's Office intervened in accordance with the law, working with police to analyze the nature of the case, actively guiding the tracking of cross-border money flows, and urging the police to promptly obtain evidence such as recharge and withdrawal transaction records from foreign virtual currency trading platforms, WeChat chat records of the suspects, and transaction details of bank accounts.
Investigations revealed that from September 2020 to January 2021, Lin and Yan had indirectly bought and sold foreign exchange worth over 21.29 million Yuan. After Xie joined from January to April 2021, the three had indirectly bought and sold foreign exchange worth over 8.38 million Yuan. "Although it seems there is no physical flow between Yuan and foreign exchange in indirect foreign exchange trading, it effectively bypasses our country's foreign exchange regulations, affects the stability of our financial market, distorts economic data, and impacts financial decisions regarding exchange rates and foreign reserves. The harm is significant," said the prosecuting attorney.
On January 26, 2024, the case was transferred to the prosecution for review and prosecution. "I didn't know that Tether came from Nigeria; I was just engaging in ordinary virtual currency 'arbitraging' to earn price differences, which is a legal arbitrage activity and does not constitute a crime," Lin stated in the interrogation room.
Faced with Lin's evasive arguments, the prosecuting attorney compared domestic and foreign transaction records, extracted chat records involving foreign exchange conversions, and gathered testimonies from domestic payees related to the conversion records, clarifying the conversion process of the funds involved, the amounts involved in the crime, and the suspects' understanding of the source and nature of the virtual currency. Under a tight chain of evidence, Lin finally admitted he knew that Tether was used by Nigerians to pay domestic payees and confessed to his crime. Later, Lin and the other two withdrew all illegal gains.
The prosecutor reviewed that Lin and the other two used virtual currency as a medium to provide cross-border exchange and payment services to earn 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 should be held criminally liable for illegal business operations according to the law.
On February 26, the Jianhu County Prosecutor's Office filed charges against Lin and the other two for illegal business operations, along with sentencing recommendations based on their criminal facts and circumstances. On April 29, the court accepted the prosecutor's charges and sentencing recommendations, sentencing Lin and Yan to five years in prison each, along with fines; Xie was sentenced to one year and six months in prison with probation, along with fines. None of the three appealed, and the judgment has taken effect.
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