After the time entered May, the crypto asset circle was turbulent, and news of overseas project parties “running away” frequently spread. Just a few days ago, another project was suspected to have run away on the BSC chain: StableMagnet Finance, an automatic market maker for stable currency exchange, swept away $22 million from users. Blockchain security firm PwckShield said StableMagnet Finance’s SwapUtils code was not verified and was inconsistent with the main Swap contract. The amount of this project running away is as high as 22 million US dollars, which is nearly 200 million yuan.
In fact, it is not uncommon for overseas projects to misappropriate money, defraud and run away. According to Bloomberg, the founder of Africrypt, an overseas cryptocurrency investment platform, has lost contact, and 69,000 bitcoins (currently worth $2.3 billion) have been transferred on the platform, and no one knows where they are . There is also the big runaway event in the history of cryptocurrency – BitClub Network is known as one of the biggest cryptocurrency Ponzi schemes, the platform used marketing advocates and very questionable marketing tactics to attract funds, eventually the scam leader was in 2019 About $722 million was swept away from investors in December.
The Nature of Cryptocurrencies such as Bitcoin in my country
On May 5, the official WeChat account “Pujiang Tianping” of the Shanghai Higher People’s Court published a case about Bitcoin in the “Case Reference Book” column. According to the analysis of the Shanghai High Court, there are many disputes in the academic circle about the legal identification of Bitcoin, and the essence of these disputes is to find the basis for identification from the traditional theory of civil rights. However, under the discussion of multiple theories, Bitcoin cannot be legally identified, so the answer is sought from judicial practice. “In judicial practice, the court follows the attitude of judicial pragmatism and does not directly judge the legal nature of virtual property. Because it has a certain economic value and conforms to the property attribute, it shall apply the legal rules of property rights for protection. ” In the case analysis, it is pointed out that in the trial practice, the people’s court has formed a unified opinion on the legal positioning of bitcoin and identified it as virtual property .
Cryptocurrencies such as Bitcoin are protected
At present, there are no regulations on the identification of the nature of Bitcoin at the legal level, only the “Notice on Preventing Bitcoin Risks” issued by the five ministries and commissions of the People’s Bank of China, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission on December 3, 2013 and the 2017 On September 4, 2018, the two departments of the “Announcement on Preventing Token Issuance and Financing Risks” issued by the People’s Bank of China, the Central Internet Information Office, the Ministry of Industry and Information Technology, the State Administration for Industry and Commerce, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission issued two departments. According to the above specifications, Bitcoin is a virtual commodity rather than legal tender, and does not have the same legal status as currency , and financial institutions are not allowed to engage in the exchange business between Bitcoin and legal tender. From a normative point of view, China currently only denies the monetary nature of Bitcoin and affirms the nature of its virtual goods , but it does not mean that Bitcoin is a virtual property. These are two different concepts.
From the perspective of judicial practice, people’s courts usually characterize Bitcoin as virtual property. Although Bitcoin and other “tokens” and “virtual currencies” do not have the legality of currency, they have the value, scarcity, exclusivity, and disposability required by property as an object of rights, and should have the legal status of virtual property. , and give the same legal protection .
Overseas platforms run away, can domestic investors defend their rights?
Of course, encrypted assets are more than just virtual currencies. Due to the explosive development since 2021, NFT has also become an indispensable part of the current encrypted asset circle. At least at present, China does not have laws, regulations and administrative orders specifically for NFT, and there is no clear definition for enterprises. Transactions involving NFTs are not illegal. In addition, many DeFi projects and DAOs do not necessarily involve virtual currency transactions. When considering their legality and rights protection paths, we need to discuss them on a case-by-case basis .
China’s crackdown on virtual currencies such as bitcoin has always been very strict. It is clear that virtual currencies such as bitcoin and ether do not have the same legal status as fiat currencies: relevant business activities are illegal financial activities; overseas virtual currency exchanges provide services to residents in China through the Internet are also classified as illegal financial activities. The “Notice” also clarifies that there are legal risks involved in virtual currency investment and trading activities. If any legal person, unincorporated organization or natural person invests in virtual currency and related derivatives and violates public order and good customs, the relevant civil legal act is invalid, and the loss caused by it shall be borne by itself; if it is suspected of disrupting the financial order and endangering financial security, the relevant departments shall comply with the law. investigate.
From this, it can also be clearly concluded that when Chinese citizens invest in virtual currency, relevant civil legal acts will be deemed invalid , which means that overseas encryption platforms “run away”, and it is difficult for Chinese citizens as investors to use Chinese laws to protect their legitimate rights and interests. .
NFT, DeFi and other crypto asset projects
As mentioned earlier, the current transactions involving NFT projects in China are qualitatively different from virtual currencies, and are not illegal. Although the legal nature of NFTs is not clear, it does not prevent them from being used as a valuable asset in judicial practice and administrative law enforcement. Property is protected by law.
At present, a considerable number of investment projects involving encrypted assets are operating overseas, and the project party generally chooses to go overseas to develop business in some countries and regions where regulatory norms are more suitable for the operation of the project. This makes it more risky for Chinese citizens to invest in crypto asset projects overseas. On the one hand, the booming crypto asset circle overseas has indeed brought wealth and opportunities, but on the other hand, it is also a source of fraud, pyramid schemes, gambling and other criminal activities. Created the soil for survival . So, how should Chinese citizens invest in overseas NFT, DeFi, DAO and other projects encounter fraud?
First of all, we need to be clear : Does the Chinese criminal law have jurisdiction over crimes committed overseas and against Chinese citizens? The answer is: yes .
(1) Protective Jurisdiction
According to Article 10 [Protection Jurisdiction] of China’s “Criminal Law”: “Foreigners who commit crimes against the state or citizens of the People’s Republic of China outside the territory of the People’s Republic of China, and the minimum punishment stipulated in this Law is fixed-term imprisonment of not less than three years, they may This law applies, except where there is no penalty under the law of the place where the crime was committed.”
Accordingly, when the person committing the fraudulent project is a foreigner, the judicial organs of our country may, in accordance with the provisions on protection and jurisdiction, obtain jurisdiction over the crimes committed against Chinese citizens abroad, and the Chinese citizens, as victims, may request relief from the judicial organs of China and protection . But in fact, due to the complexity of such transnational crimes (there are great difficulties in obtaining evidence, law enforcement, etc.), it often requires the coordination of law enforcement by overseas judicial organs, and it is not easy to protect the rights of victims.
(2) Territorial jurisdiction
Due to the particularity of blockchain applications such as virtual currency and NFT, there are also precedents in China’s judicial practice that they are regarded as some kind of computer data protection . Information system crime. Then, crimes against virtual currencies and NFTs are likely to be classified in the category of ” crimes using computer networks “.
For such crimes committed using computers, according to the provisions of Article 2 of the Interpretation of the Supreme People’s Court on the Application of the Criminal Procedure Law of the People’s Republic of China, crimes committed against or mainly using computer networks, the place of crime includes the use of the crime to commit the crime. The location of the server used by the network service of the behavior, the location of the network service provider, the location of the information network system and its manager, the location of the information network system used by the defendant and the victim in the course of the crime , and the location of the victim when the victim was violated and the victim’s property suffered losses, etc.
Therefore, in the crime of fraud, even if the perpetrator is overseas, targeting or mainly using computers to commit fraud, as long as the criminal process (1) the location of the information network system used by the defendant and the victim is China, or (2) the victim was If the location of the infringement and the place where the victim’s property suffered damage is in China, the judicial organs of our country can pursue the criminal responsibility of the fraudster according to the principle of territorial jurisdiction .
(3) Personal Jurisdiction
“Chinese people don’t lie to Chinese people” is a buzzword in recent years, which to a certain extent reflects the fact that many of the crimes such as fraud, pyramid schemes, gambling and other crimes committed against Chinese citizens on overseas networks are committed by Chinese citizens. The only difference from domestic traditional telecommunication fraud is that the perpetrators have shifted the crime scene from domestic to foreign .
If the main responsible person of the crypto asset project party who commits fraud is Chinese, according to the provisions of Article 7, paragraph 1 [personal jurisdiction] of China’s “Criminal Law”: ” Citizens of the People’s Republic of China commit crimes outside the territory of the People’s Republic of China. This law shall apply to the crimes specified in this law , but if the maximum punishment stipulated in this law is fixed-term imprisonment of not more than three years, it may not be investigated.” Generally speaking, the amount of fraud crimes involving encrypted assets is relatively large, even if it is in accordance with local laws From the point of view, the maximum sentence for the crimes committed by him (note that this refers to the maximum sentence that may be sentenced for a specific crime, not the actual sentence) is more than three years. The judicial organs of our country have jurisdiction over such crimes committed abroad by their own citizens against citizens in China .
In addition, in recent years, criminal activities have increasingly shown a trend of internationalization and globalization. Criminal judicial assistance between China and different countries has become more and more frequent, and remarkable results have been achieved in international recovery of stolen goods and fugitives. Old people in the currency circle should know that a few years ago, a pyramid selling gang based on virtual currency mining investment, committed crimes against Chinese citizens abroad, causing tens of billions of losses to Chinese citizens, and finally the actual controller of the gang With the assistance of international criminal justice, he was captured in an island country in the Pacific Ocean, and finally extradited to his home country. It can be said that the national border is no longer the umbrella of crime, and the protection of Chinese citizens’ personal safety, legal property and other rights and interests is no longer empty talk .
Write at the end:
Although rights protection is not impossible, it is indeed not easy . Due to overseas operations, the operating entities of these platforms are relatively concealed. They frequently change website domain names and server addresses, and adopt online and offline transactions to evade the crackdown of the regulatory authorities. Often different, consumers are often unable to determine the identity of the operator, and once property damage occurs, it is difficult to recover .
Consumers and investors should take the initiative to enhance the awareness of risk prevention and self-protection, and do not blindly follow the trend and participate in relevant speculative behaviors . If any institution is found to be involved in such illegal financial activities, report it to the relevant regulatory authorities or the China Internet Finance Association in a timely manner. Those suspected of illegal crimes should report the case to the public security organ in a timely manner.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/overseas-encryption-projects-frequently-run-away-how-can-domestic-investors-defend-their-rights/
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