Legal Boundaries in Virtual Money Investment Disputes: Distinction Between Civil Disputes and Criminal Fraud

Introduction

Since the introduction of relevant regulatory policies in 2021, there has been a certain consensus in mainland China regarding the attitude towards Virtual Money: citizens are not prohibited from investing in Virtual Money and its derivatives, but actions that violate public order and good customs are not protected by law. Since Virtual Money is not considered legal tender, related disputes face many challenges in judicial practice. The difficulty of civil case filing is high, and the standards for criminal case filing are strict, resulting in many cases being difficult to enter the judicial process.

However, the recognition of the property attributes of mainstream Virtual Money by the judicial authorities is increasing. There have even been instances of excessive interpretation, treating investment disputes that should belong to the civil category as criminal cases. Therefore, it has become particularly important to clearly define the boundaries between "civil disputes" and "criminal offenses" in Virtual Money investments. This article will analyze this issue in depth through a specific case.

1. Case Overview

A public judgment from the Intermediate People’s Court of Foshan City, Guangdong Province ((2024) Yue 06 Criminal Final 300) reveals a fraud case involving Virtual Money. Between May and June 2022, the defendant Ye某某, under the pretext of a fictitious investment project, promised high returns and deceived multiple victims into investing a total of 2.5 million yuan, which included 500,000 yuan equivalent in USDT.

After obtaining the funds, Ye used most of it for personal consumption and debt repayment, ultimately unable to fulfill his promises. The first-instance court found him guilty of fraud, sentencing him to 11 years in prison. After the appeal, the second-instance court upheld the original judgment.

The defendant and his defense lawyer raised two main defenses: first, they believe that the relationship with the victim is a private lending relationship; second, they question the lack of sufficient evidence to prove that 500,000 Virtual Money was received. These views were not accepted by the court.

It is worth noting that the court's practice of equating USDT with "funds" is controversial. Strictly speaking, the investment losses of citizens who purchase Virtual Money on their own are generally not protected by law. However, if Virtual Money is fraudulently obtained by others, should it receive legal protection? Current judicial practice tends to provide certain protections for mainstream Virtual Money, but it requires accurately distinguishing the boundaries between civil investment and criminal offenses.

2. From "Civil Disputes" to "Criminal Fraud": What are the Standards for Determination?

The key to distinguishing between "civil disputes" and "criminal fraud" lies in the subjective intent and objective behavior of the perpetrator. In this case, the main basis for the court's determination that Ye certain constituted the crime of fraud includes:

1. The defendant admits to using part of the investment funds to pay off personal debts.
2. Acknowledge that part of the funds will be used for lending and investing in Virtual Money.
3. The bank statement shows that luxurious goods were quickly purchased after receiving the investment funds.
4. Liabilities exist and there are no fixed assets at the time of receiving investment funds.
5. Personal income is far lower than expenses, and the economic situation is poor.
6. Create false transfer records to deceive the victim and do not actively repay.

These factors combined are sufficient to prove that Ye has fraudulent behavior. However, in actual cases, a single factor may not be enough to constitute fraud. The key lies in whether the defendant can provide evidence that real investment activities were conducted.

III. Court Determination: Virtual Money Can Be Used as an Object of Fraud

In this case, the court recognized USDT valued at 500,000 yuan as the object of the fraud. Although the defense attorney questioned the inability to prove that the defendant received Virtual Money, the court established this fact based on chat records and the defendant's confession.

The court believes that virtual money has manageability, transferability, and value, and can become the object of fraud crimes. This determination is of significant reference value for cases related to virtual money.

4. Practical Judgment: If an investor has been deceived, is it definitely fraud?

Not all investment losses constitute fraud. To determine whether a fraud crime is established, several key factors usually need to be considered:

1. Does the actor have the "purpose of illegal possession"? This is the subjective requirement of the crime of fraud. It is necessary to determine whether the perpetrator intended to illegally occupy the property of others from the very beginning, rather than operating sincerely.

2. Is there any behavior of fabricating facts or concealing the truth? Common manifestations include fabricating false platforms, exaggerating technological breakthroughs, concealing the use of funds, etc.

3. Did the victim "dispose of property based on a misunderstanding"? It is necessary to review whether investors have made investment decisions due to being misled. If investors actively participate despite being fully aware of the risks, it is difficult to constitute fraud.

4. Is the flow and use of funds real and legal? If funds are rapidly transferred, used for personal consumption, or for illegal purposes, they are more likely to be classified as fraud. In contrast, if the funds are used for actual project investment, they are more likely to be seen as a civil dispute.

V. Conclusion

The field of Virtual Money investment presents both opportunities and risks. From the perspective of judicial practice, related disputes show a complex trend of "civil and criminal interweaving." For investors, it is important to enhance risk awareness, make prudent decisions, and avoid easily believing in high return promises. Once losses occur, it is necessary to rationally assess the avenues for safeguarding rights and choose between civil litigation or seeking criminal prosecution based on specific circumstances.

Although the virtual world is intangible, legal standards cannot be vague. Only by developing within regulations can a balance between technological progress and legal protection be achieved. For judicial authorities, it is crucial to strictly grasp legal standards and accurately distinguish between civil disputes and criminal offenses in order to maintain market order and protect investors' rights.