The Civil and Criminal Boundaries in Virtual Money Investment Disputes

In recent years, the regulatory policies regarding Virtual Money in our country have gradually become clearer. Since the release of the "9.24 Notice" in 2021, a common consensus has been formed: our country does not prohibit citizens from investing in Virtual Money and its derivatives, but if it violates public order and morals, the law will not provide protection, and the risks are borne by the individuals. At the same time, since Virtual Money does not have the status of legal tender, it should not circulate as currency in the market.

This has led to some dilemmas in judicial practice. On the one hand, civil courts are becoming increasingly cautious about accepting cases related to Virtual Money disputes; on the other hand, the evidentiary standards for criminal cases are quite high. However, the recognition of the property attributes of mainstream Virtual Money by judicial authorities is gradually increasing, and sometimes even controversial judgments may occur.

This article will explore the boundaries between "civil disputes" and "criminal offenses" in virtual money investment disputes through a specific case.

1. Case Overview

In a public ruling from the Intermediate People's Court of Foshan City in Guangdong Province, the case is generally as follows:

Between May and June 2022, the defendant fabricated investment projects, promised high returns, and lured multiple victims into investing a total of approximately 2.5 million yuan (including 500,000 equivalent in USDT). The defendant used most of the funds for personal consumption and debt repayment. Due to the inability to fulfill the promises, the victims reported the case.

The court's first-instance judgment found the defendant guilty of fraud and sentenced him to 11 years of fixed-term imprisonment. After the appeal, the second-instance court upheld the original judgment.

The defendant and their defense attorney put forward the following points:

1. The relationship between the defendant and the victim is a private lending relationship;
2. The evidence is insufficient to prove that the defendant received virtual money equivalent to 500,000 yuan.

These views were not adopted by the court.

It is worth noting that the court directly referred to the USDT received by the defendant as "funds," which is controversial. Strictly speaking, citizens are not legally protected from investment losses after purchasing virtual money with legal tender. However, if virtual money is defrauded by others, should it be legally protected? Current judicial practice tends to provide certain protection for mainstream virtual money, but it is necessary to clearly distinguish between civil investment and criminal offenses.

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

The fundamental difference between "civil disputes" and "criminal fraud" lies in whether the perpetrator has the intent to illegally possess and whether they have objectively committed fraudulent acts.

In this case, the court's main basis for determining that the defendant constitutes the crime of fraud includes:

1. The defendant admits to using part of the investment funds to repay old debts;
2. The defendant admitted to using part of the funds for lending and investing in Virtual Money;
3. The bank statement shows that the defendant quickly purchased a Mercedes sedan after receiving an investment of 1 million yuan;
4. The defendant was already heavily in debt and had no property when receiving the investment;
5. The defendant's monthly income is insufficient to pay for the car loan, resulting in a deficit situation.
6. The defendant forged Virtual Money transfer records to deal with the victim's claims for compensation, and had not actively raised funds for repayment until before the incident occurred.

Considering these factors, the court determined that the defendant engaged in fraudulent behavior. In practice, a single factor may not be sufficient to establish fraud, but the accumulation of multiple factors is difficult to refute. Unless the defendant can prove that the victim's money was indeed used for legitimate investment.

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

In this case, a victim used USDT worth 500,000 yuan for a transfer, which the court recognized as an investment "amount." Although the defense lawyer questioned the inability to prove that the defendant received this virtual money, the court established this fact based on WeChat chat records and the defendant's confession.

The court believes that virtual money has the potential for management, transfer, and value, and can be used as an object of fraud. Therefore, it is determined that the defendant defrauded 500,000 worth of USDT.

IV. Practical Judgment: If an investor is deceived, is it definitely fraud?

In virtual money investment disputes, not all losses constitute fraud crimes. The boundary between criminal and civil must be defined by statutory standards. In judicial practice, whether or not fraud is constituted usually considers the following factors:

1. Does the perpetrator have the "intent to illegally possess"? This is the subjective constitutive element of the crime of fraud. The key lies in determining whether the perpetrator intended to illegally occupy the property of others from the very beginning.

2. Is there any behavior of fabricating facts or concealing the truth? This is the objective element of the crime of fraud, which is particularly typical in the field of Virtual Money, such as fabricating false platforms and claiming misleading information.

3. Did the victim "dispose of property based on a mistaken belief"? It is necessary to examine whether the victim made investment decisions due to being misled. This is key to distinguishing between fraud and civil disputes.

4. Is the flow and use of funds real and legal? Tracing the flow of funds can strengthen the judgment of "illegal possession." If the funds are used for actual project investment, it is more likely to be classified as a civil dispute.

V. Conclusion

The investment field of Virtual Money is characterized by both opportunities and risks. From the perspective of judicial practice, related disputes show a complex trend of "civil and criminal intertwining." For investors, it is essential to enhance risk awareness and make cautious decisions; when faced with losses, it is also necessary to rationally assess the path for safeguarding rights.

Although the virtual world is intangible, legal standards cannot be vague. Only by advancing within regulations can we achieve a dynamic balance between technological development and legal protection.