Cryptocurrency crime: Beijing embezzlement case involving hundreds of millions of yuan, 89 million yuan recovered

Source: Xiao Sa lawyer

The so-called "duty crime" is not a single crime in my country's criminal law system, but a general term for crimes that should be punished in accordance with the Criminal Law, such as corruption, bribery, favoritism, abuse of power, dereliction of duty, infringement of citizens' personal rights and democratic rights, and destruction of state regulations on official activities by staff of state organs, state-owned companies, enterprises, institutions, and people's organizations using their existing powers.

The Sister Sa team found in practice that at present, the corruption and bribery crimes of state organ staff, as well as the occupational embezzlement and bribery crimes of non-state organ staff, are increasingly involving crypto assets - more and more people are using crypto assets as a secret tool for profit transfer.  

Today, the Sister Sa team will take the recent cases that have appeared/solved as an example to talk to you about some key information revealed by these examples of currency-related duty crimes in the crypto era.

01 A review of recent major cases of official crimes involving currency

What are the characteristics of cryptocurrency? An old and fundamentalist narrative describes it this way: cryptocurrency has the characteristics of decentralization, anonymity, immutability, fast transaction speed, low transaction cost, and global peer-to-peer transactions.  

Today, the above perception of cryptocurrency is both right and wrong. At least, with the development and progress of technology, the anonymity of cryptocurrency has become lower and lower, and the so-called "anonymity" is becoming a "general means" for ordinary people to protect their transaction privacy. In other words, if the judicial authorities, technology companies and other technically powerful parties want to check, most of the transaction information will be exposed.

(I) Case of high-ranking CSRC officials committing crimes involving currency

Not long ago, the CSRC Discipline Inspection and Supervision Group and the Guangdong Supervision Committee jointly issued an announcement stating that the former director of the Science and Technology Supervision Department of the China Securities Regulatory Commission had seriously violated discipline and law, abused the power of policy recommendation, formulation, and execution, abandoned the responsibility of science and technology supervision, sought improper benefits for others in the expansion of business and software and hardware procurement of information technology system service institutions, and used virtual currency to trade power for money.  

From the announcement, the CSRC official may be suspected of multiple crimes, and the possibility of suspected bribery is relatively high.  

According to Article 385 of the Criminal Law of the People's Republic of my country, the crime of bribery refers to the crime of state functionaries using their official positions to solicit property from others, or illegally accepting property from others to seek benefits for others. If state functionaries violate state regulations in economic transactions and accept kickbacks and fees of various names for personal use, they shall be punished for bribery.  

Generally, the threshold for filing a case of bribery is 30,000 yuan. In terms of sentencing, if the amount is between 30,000 yuan and 200,000 yuan, the offender shall be sentenced to fixed-term imprisonment of less than three years or criminal detention and a fine; if the amount is between 200,000 yuan and 3 million yuan, the offender shall be sentenced to fixed-term imprisonment of more than three years but less than ten years and a fine or confiscation of property; if the amount is more than 3 million yuan, the offender shall be sentenced to fixed-term imprisonment of more than ten years or life imprisonment and a fine or confiscation of property.

(II) Beijing's 140 million yuan virtual currency embezzlement case, 89 million yuan recovered

On December 20 this year, the Beijing Municipal People's Procuratorate released a special "enterprise protection" action case: an employee of a company used his position to defraud the company's property, and used multiple overseas encrypted asset trading platforms and "coin mixers" to transfer the proceeds of crime.

From 2020 to 2021, Feng used his position as a service provider and regional operations growth department of a technology company to conspire with Tang and Yang to defraud the company's service provider bonuses totaling more than 140 million yuan.  

Subsequently, Feng directed Tang and Yang to use 8 overseas virtual currency trading platforms to convert the money involved in the case from RMB to virtual currency, and used overseas "mixing currency" platforms to confuse the source and nature of the funds, and transferred them through multiple levels in the form of virtual currency. Part of the money involved in the case flowed into accounts controlled by Feng and others in the form of RMB, and part of the money involved in the case was concealed by Feng and others in the form of virtual currency.  

After the case was exposed, Feng returned 92 bitcoins BTC on his own (if the BTC price is calculated at $100,000 per coin, it is about RMB 66.9 million), and recovered a total of more than 89 million yuan in stolen money, which minimized the economic losses of the victim unit.  

Because Feng is not a staff member of a state organ, and the victim company is not a state organ, enterprise or institution, Feng's behavior of using his power to defraud the company's finances is suspected of "occupational embezzlement". Article 271 of my country's Criminal Law stipulates that if a staff member of a company, enterprise or other unit uses his position to illegally take the property of the unit for his own use, if the amount is relatively large, he shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention and a fine; if the amount is huge, he shall be sentenced to fixed-term imprisonment of not less than three years but not more than ten years and a fine; if the amount is extremely huge, he shall be sentenced to fixed-term imprisonment of not less than ten years or life imprisonment and a fine.  

It should be noted that on April 29 this year, the Supreme People's Procuratorate and the Ministry of Public Security jointly issued the revised "Regulations on the Standards for Filing and Prosecuting Criminal Cases under the Jurisdiction of Public Security Organs (II)", which adopts the same standards for conviction of state staff duty crimes such as bribery for the filing and prosecution of five types of non-state staff duty crimes such as bribery. The new regulations clearly stipulate that if a person in a company, enterprise or other unit uses his or her position to illegally take the property of the unit for his or her own use, and the amount is more than 30,000 yuan (the original standard is more than 60,000 yuan), he or she shall be prosecuted.  

For the sentencing of the crime of embezzlement, after the 11th Amendment to the Criminal Law will be issued in 2020, the sentencing range will be adjusted from two levels to three levels, and the judicial interpretation has not yet been improved and followed up. Therefore, in practice, the sentencing of this crime generally follows the following provisions and judicial practices:

02 What key information does the example of currency-related duty crime reveal?    

Why do we say that bribery using cryptocurrency is nothing or everything? This is also due to the technical characteristics of blockchain technology that the data on the chain cannot be tampered with and is open and transparent - encrypted assets themselves are very hidden, but once the facts of the crime are verified, it is ironclad evidence.

In the cases related to duty crimes previously handled by Sister Sa's team, clarifying the capital chain and flow of the criminal suspects' duty crimes is often the top priority of such cases.A large number of criminal suspects will use their social relationships to conceal and disperse the crimes through various secret measures and establish layers of risk isolation measures.  

However, in cases where encrypted assets are used to commit duty crimes, the capital flow chain is often relatively complete and traceable, and the authenticity is guaranteed. Once it is verified that there is a connection between the capital flow involved in the case and the criminal suspect's duty crime (which is often the difficulty in investigating such cases), the relevant on-chain data will become ironclad evidence of the crime.

From several recent official crimes involving currency, my country's judicial organs have revealed several key information in handling such cases:

1. The reconnaissance technology has been significantly improved, and the coin mixer is no longer a tool for money laundering/concealing the proceeds of crime

From the embezzlement case disclosed by the Beijing Municipal Procuratorate, it can be found that even if the suspects used multiple cryptocurrency trading platforms, or even coin mixers to confuse the capital chain, the criminal facts were still known to the judicial organs. Therefore, the Sister Sa team believes that for the reconnaissance technology of the judicial organs of my country (it is reasonable to speculate that other major economically developed countries and jurisdictions also have the same level of technology), the current mainstream coin mixer can only play a role in increasing the workload of reconnaissance, and it is definitely possible to investigate if you want to.  

2. The recovery of the proceeds of official crimes involving currency still mainly depends on the initiative and consciousness of the suspects 

In fact, this can be seen from the recent unfreezing cases of overseas crypto assets handled by the SA Jie team. Crypto assets do have their own particularity that is different from other assets - the recovery of the proceeds depends largely on the cooperation of the suspects.  

Using USDT as an example, if the suspects exchange the proceeds of the crime for stablecoins such as USDT and hide the assets, even if the flow of the funds can be found, the funds have been actually controlled by foreign personnel. my country's judicial authorities can only issue a judicial freezing document to the issuer Tether Company, requiring the funds to be frozen. The actual consequence is that the overseas suspects cannot use the funds involved in the case, but my country's judicial authorities cannot directly recover them.

If the funds are exchanged for crypto assets such as BTC and ETH and hidden in cold wallets and controlled by foreign personnel, my country's judicial authorities cannot even effectively freeze them, let alone recover the proceeds.

03 Written at the end

With the advent of the crypto asset bull market led by BTC and the integration and cooperation between the traditional financial system and crypto assets, the scale of the entire industry is constantly expanding. In my opinion, the Sister Sa’s team believes that crypto assets will become an increasingly common means of duty-related crimes in the future.

On the one hand, this requires my country’s Commission for Discipline Inspection and Supervision and public security organs to strengthen their understanding and knowledge of crypto assets as soon as possible and upgrade their reconnaissance technology in a targeted manner; on the other hand, state agency staff and corporate directors, supervisors and senior managers should also realize that crypto assets are not a panacea for profit transfer, and should not touch the criminal red line with luck.