What are the legal risks of arbitrage in the currency circle?

Source: Lawyer Liu Honglin

01 What is the currency circle? ?

The brick-and-mortar arbitrage model has actually been around for a long time. To put it bluntly, it means "buying low and selling high" and relying on the price difference to obtain profits. Different commodities often have different prices in different regions. Then buy them at a low price and sell them at a high price. After deducting the cost, you will get the profit from this "brick-moving".

This arbitrage model has also extended to today’s currency circle.

This is the Dogecoin that the author found on the non-small account when writing the article Trade prices on different platforms. Theoretically, as long as you register an account, purchase the corresponding virtual currency, and trade on different exchanges, you can earn the price difference.

Compared with the past arbitrage, the currency circle arbitrage has the advantages of low threshold and fast realization, and has become very popular recently. While a group of people sensed business opportunities, some criminals also focused on this piece of "fat."

02 The geometry of brick-moving routines in the currency circle

• Lost principal due to fraud

Since the currency circle came out, it has been sticking to it all night The label of sudden wealth and the influx of many newbies made the scammers say, "There are too many leeks and there are obviously not enough sickles." For example, the "Plus Token" platform mentioned in many previous articles by Mankiw Law Firm was once known as the "Yu'E Bao" in the currency circle. It attracted tens of billions of dollars in gold around the world and deceived users into buying mainstream currencies such as Bitcoin and Ethereum with real money. It is a virtual currency, but all profits and commissions within its platform are air coins such as “Plus coins”. In the end, the platform was shut down and millions of people lost their money.

The "Plus Token" platform is a typical type of fraud that defrauds users of their investments. . However, in addition to the issuance of "air coins", there is another fraud scheme to obtain principal, which is rebate counterfeit coins.

On April 8, 2020, the Ouhai police in Wenzhou, Zhejiang, cracked the country's first criminal case using blockchain "smart contracts", involving more than 100 million yuan. Several principal culprits in the case used a Telegram communication group called "Huobi Global Brick Arbitrage HT Chinese Group Community" to promote the group's brick-moving tutorials, and used "shills" in the group to enhance the atmosphere and create high returns for the tutorials The illusion is to trick many people into transferring their ETH to the account provided by the group owner. When it is discovered that the ETH returned by the group owner is indeed a counterfeit currency that cannot be traded, it is too late.

(Information in the Telegram group was exchanged in this case)

• Arbitrage fails and anti-criminal involvement

In addition to the above-mentioned methods of defrauding money, many criminals have developed ideas about "people".

In September 2020, Xu was introduced by his friend Lei to a "good Samaritan" who led him to make money by trading Huobi and Bitcoin on "Huobi.com". Under the request and guidance of "good Samaritans", I applied for multiple bank cards at major banks in Leiyang City, and helped the other party transfer in and out funds of more than 500,000 yuan from September to November 2020. Later investigation It is clear that these funds were illegally obtained by "good Samaritans" in the process of committing online fraud. After a court ruling, Xu was sentenced to the crime of assisting information network criminal activities (Case No.: (2021) Xiang 0481 Xingchu No. 107, hereinafter referred to as the "crime of assistance").

So what is the crime of accomplices? Why was Xu sentenced to the crime of aiding others?

Article 287-2 of the "Criminal Law" stipulates: "Knowing that others are using information networks to commit crimes, providing Internet access, server hosting, network storage, communication transmission and other technical support for their crimes, or providing advertising Promotion, payment and settlement, etc., and if the circumstances are serious, he shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall also or solely be fined.”

In short, it means helping others to commit cybercrime activities, and in Subjectively, it reaches the level of "knowledge". Objectively, it is not difficult to understand that helping others commit criminal activities is a simple factual judgment. The focus of this crime is how to reach the level of "knowingly" subjectively.

On October 21, 2019, the Supreme People's Court and the Supreme People's Procuratorate jointly issued the "Interpretations on Several Issues Concerning the Application of Laws in the Handling of Criminal Cases such as Illegal Use of Information Networks and Assistance in Information Network Criminal Activities", which included The determination of "knowingly" in the crime of aid and trust has been stipulated:

Article 11: Providing technical support or assistance to others in committing crimes, Under any of the following circumstances, the perpetrator may be deemed to have knowingly known that others were using information networks to commit crimes, except where there is evidence to the contrary:

(1) Still carrying out relevant behaviors after being notified by the regulatory authorities;

(2) Failure to perform statutory management duties after receiving reports ;

(3) The transaction price or method is obviously abnormal;

(4) Providing programs, tools or other technical support and assistance specifically for illegal crimes;

(5) Frequently using covert Internet access, encrypting communications, destroying data and other measures or using false identities to evade supervision or evade investigation;

(6) Providing technical support and assistance for others to evade supervision or avoid investigation;

(7) Other circumstances sufficient to establish that the perpetrator was aware of the crime.

It is not difficult to see from this that the current subjective determination of the crime of aid and trust in our country does not require the suspect to know that he is helping others to engage in cybercrime activities or to engage in any specific activities. For this type of criminal activity, as long as there are circumstances such as abnormal transaction prices or methods, and continued transactions after being informed, it can be presumed that the suspect has reached the level of "knowingly" in the crime of aid, including Article (7) This cover-up clause also provides a wider space for judicial authorities to determine subjective "knowledge".

In addition, fraud in the currency circle may also involve the crime of covering up and concealing criminal proceeds (hereinafter referred to as the "crime of concealment"). The crime of concealment and the crime of aiding and trusting have many similarities. For example, they both require the existence of predicate crimes, and they are aware of or can be presumed to be aware of the predicate criminal activities. They both require subjective intentionality, that is, "hoping or allowing the result to harm society." occurs” (Article 14 of the Criminal Law), etc.

The main difference between the crime of concealment and the crime of aiding and trusting is mainly reflected in the object of the crime. The crime of aiding and trusting mostly involves participation in the upstream criminal activities, while the crime of concealment mainly targets the stolen money and property after the upstream crime has been completed. Of course, there are still many controversies about the two crimes in the theoretical and practical circles. We will not discuss them too much here. As long as everyone is aware of the criminal risks involved in the two crimes in the currency circle.

• The bank card is frozen and difficult to unlock

Once the funds in the card are considered to be involved in criminal activities, it is very likely to be frozen by the public security organs, and the bank can also take freezing measures on the bank card from a risk management perspective. Almost every day, Mankiw Law Firm encounters inquiries about bank cards being frozen due to currency manipulation or simple virtual currency transactions. Once it is really frozen, the road to unfreezing is long, and there is rarely an ideal result of unfreezing in a short period of time. There are even cases where the person involved went to his uncle to consult about the situation and was detained, never to return. Lawyer Mankiw has also written many articles on the reasons for bank card freezing, unfreezing and other issues. It can be said that it is very considerate and practical. Friends who are interested and need it can pick it up themselves.

03 Stay away from routines and keep your freedom and hard-earned money

The best way to stay away from routines is to first ask yourself when you encounter a so-called "good project", how can I come into contact with such a "good" project, and why do others want to introduce it to me when it is so profitable? There is no shortage of legends about getting rich overnight in the currency circle, but if you don’t see it, “one general can make a thousand bones wither”, and careful consideration beforehand is better than all remedial measures.

Secondly, for the "leader" who enthusiastically recommends the brick-moving project to you, or the "investor" who is enthusiastic about helping you operate funds, you should do a good job of back-up work. Whether it is reliable or not makes the most difference It is an intuitive and abstract judgment. Once something goes wrong, it is worth thinking more about whether he has the ability to take responsibility and whether you have a way for him to take responsibility. Lawyer Mankiw has witnessed too many cases in which "leaders" or "investors" advertised in advance that they were trustworthy and would be worth the client's money, but then lost contact within seconds after the incident.

Again, if you really want to speculate in currencies and OTC transactions, it is recommended to use a dedicated card, conduct fund review, verify the other party’s identity, account opening information, capital flow, etc., and keep it Complete transaction process and chat records to avoid being unable to prove your innocence after receiving stolen money. Even if you are accidentally blocked, the impact on your normal life can be minimized.