How to provide a good criminal defense if you are caught buying and selling USDT to make a profit?

introduction:

In daily transactions, OTC merchants are most worried about "black money" because it may involve account freezing, or even criminal risks such as aiding and abetting, concealing, etc. However, does the "clean" money in transactions mean there is no criminal risk at all?

In the previous article "U Merchants were arrested for buying and selling USDT Tether, how to do a good criminal defense?", we mainly talked about OTC merchants being convicted of "payment and settlement type" illegal business crimes. However, in the daily operations of OTC merchants, it is easier to violate and more likely to be convicted by judicial authorities , which is the "foreign exchange buying and selling type" illegal business crime.

In the article "Is OTC digital currency trading a crime?" written by the author, the relevant legal provisions involving the crime of "foreign exchange trading" have been listed in detail. Generally, only the two situations of foreign exchange speculation or disguised foreign exchange trading may involve criminal offenses, while private trading and illegal introduction of trading are generally classified as administrative violations. However, if the person who introduces the trading of foreign exchange implements the trading of foreign exchange in the name of the buyer and seller, there is also the possibility of being identified as a criminal violation.

Typical Cases [i]

In November 2021, Chen started a business of buying and selling virtual currencies with cash. He bought USDT from retail investors in the cryptocurrency circle and then resold it to the acquirer to make a profit from the difference. For example, on the virtual currency trading platform, 1U coin = 6.36 yuan, so Chen bought retail investors' U coins at 1U coin = 6.24 yuan, and then sold it to the acquirer at 1U coin = 6.27 yuan.

In February 2022, Chen was caught red-handed by the public security organs, and more than 5.1 million yuan in cash was seized on the spot.

After the trial, the court held that Chen used the form of buying and selling virtual currency to disguise the purchase and sale of foreign exchange, which was a serious crime and constituted the crime of illegal business operation. Chen was sentenced to eight months in prison.

How to distinguish between crime and non-crime?

The illegal buying and selling of foreign exchange is defined as “illegal business operation”, which requires that the perpetrator subjectively intends to earn the exchange rate difference and has a profit-making purpose. Objectively, it is the act of “speculating” and “disguised buying and selling” of foreign exchange. The two high courts further explained the specific manifestations of this behavior [ii]: “speculating on foreign exchange refers to the illegal act of buying low and selling high in the domestic foreign exchange black market to earn the exchange rate difference; disguised buying and selling of foreign exchange refers to the act of not directly buying and selling RMB and foreign exchange, but using foreign exchange to repay RMB or RMB to repay foreign exchange, or exchanging foreign exchange and RMB to achieve currency value conversion. Cross-border fund redemption is a typical disguised foreign exchange behavior.”

Based on our understanding of this explanation, we analyze several possible scenarios in practice:

1. Xiao Zhao is engaged in underground money exchange and foreign exchange speculation. Xiao Wang trades with him and sells virtual currency or foreign currency to Xiao Zhao. If Xiao Wang is aware of Xiao Zhao's behavior, he may be an accomplice of Xiao Zhao's illegal business operation. If Xiao Wang is not aware of Xiao Zhao's behavior or it cannot be inferred that Xiao Wang is aware of it, Xiao Wang does not have the subjective intention to commit this crime.

2. Xiao Li found Xiao Wang, a U merchant, and exchanged his foreign currency for U through a transaction with Xiao Wang. However, Xiao Li's actual purpose was to exchange the foreign currency for RMB. After Xiao Wang learned about this, he helped Xiao Li exchange U for RMB because he wanted to make a profit from the price difference. Therefore, Xiao Wang participated in the whole process of helping Xiao Li exchange foreign currency for RMB and made a profit from it, so he committed the crime of illegal business operation.

3. How to avoid the legal risks of Xiao Wang, a U merchant in the above-mentioned second situation? The answer is a one-way transaction, and the price must be reasonable. According to the laws of our country, virtual currency is a commodity, and it is not illegal for citizens to buy and sell it between individuals. Therefore, after Xiao Li and Xiao Wang buy/sell U, Xiao Wang sells/buys U with others. In this case, Xiao Wang, a U merchant, does not engage in disguised foreign exchange transactions. Even if Xiao Li then exchanges foreign exchange through others, it has nothing to do with Xiao Wang.

In addition, whether the price is reasonable is also an important factor in considering whether Xiao Wang is suspected of disguised foreign exchange trading. U merchants who engage in arbitrage business must want to earn the difference by buying low and selling high. But if Xiao Wang sells at a low price after trading with others and suffers a loss, this must be an abnormal trading behavior. If his upstream and downstream are suspected of crimes, Xiao Wang may become an accomplice of others.

4. Other situations. USDT Tether, because its value is benchmarked against the US dollar and its value is stable, can be very conveniently used as a conversion tool between legal tender and foreign currency. Therefore, although the legal attributes of virtual currency in my country are defined as "commodities", the exchange between legal tender and foreign currency through USDT can be regarded as "disguised foreign exchange trading". However, if the virtual currency acceptor buys/sells unstable coins, because unstable coins may have a huge price difference in the short term, then from the perspective of criminal defense, it will reduce the subjective malice of the perpetrator suspected of illegally trading foreign exchange by buying and selling virtual currencies.

Attorney Mankiw recommends

As a "pocket crime" in my country's criminal law, the crime of illegal business operation has been widely criticized. Whether virtual currency involves "payment settlement type" or "foreign exchange trading type" illegal business operation crimes, there is still a lot of controversy in practice. my country does not prohibit the sale of virtual currency between individuals, which is why the U-business business is not illegal. The simple transaction itself is not a crime, and the guilty are those who use this transaction model to engage in illegal and criminal acts. Therefore, starting from the subjective purpose and behavior pattern of the transaction object is an important breakthrough for criminal lawyers to defend whether such cases are suspected of illegal business operations.