The truth hidden in 6,599 blockchain case judgments: the judgment result is a metaphysics, and how to execute it is even more difficult

Golden Financial Reporter Jessy

In 2021, lawyer Liu Lei won a case involving entrusted investment disputes involving 410 Ethereum. Unlike previous courts, which mostly found the contract invalid or directly dismissed the claim on the grounds that virtual currency assets were not currency and disrupted financial order, this time , although the court also ruled that the entrusted investment contract is invalid, it requires the party entrusted to invest to return the original virtual currency.

This is an uncommon precedent for virtual currency investment contract disputes in judicial practice. But when it came time to enforce the judgment, the problem arose again. The other party refused to execute it. At this time, the court did not have any compulsory measures. For example, it could not freeze his wallet account, nor could it execute other property equivalent to the virtual currency. The difficulty of implementation points to the root cause of the problem is that in judicial practice, virtual currency is not considered property.

Whether it is a property dispute

The executive judge was having a hard time, "How do I execute this? Can't I seal up, seize, or freeze it (referring to Ethereum)?"

Liu Lei asked, "Then can you seal up and seize the equivalent property or put it on the list of untrustworthy executors?"

Clearly, none of these courts could operate. Although in the final automatic performance notice of the judgment, it is clearly stated that "if the debtor fails to perform its obligations within the period and method specified in this judgment, causing the creditor to apply to the people's court for compulsory execution, the people's court will impose restrictions on the debtor's consumption, Measures such as the list of untrustworthy persons subject to enforcement."

For the executive court, they have no way or the right to freeze the wallet address storing the virtual currency, and if it is enforced by seizing other assets equivalent to it, this is pricing the virtual currency, which is also impossible for the court to directly Completed.

It has been more than a year since the judgment of the second instance came into effect, but because it has not been able to be implemented, Liu Lei, as the agent of the party, filed another "confirmation lawsuit" in order to set a price for Ethereum.

Putting aside the dilemma of specific implementation. In addition to the judgment of the case, Liu Lei also knows that such precedents are not universal, and the precedents will not be online, and will not give some references to similar cases in the future.

More often, the more common judgments in domestic cases similar to the above cases are that judges generally reject the appellant's request on the grounds that virtual assets are not currency, virtual asset transactions are not protected, and financial order is disrupted. Or it is the case that the virtual currency is ignored after the contract is directly determined to be invalid. In civil cases, not only disputes over investment and financial management, but also the division of divorce property and labor disputes involving virtual currency payment of wages, judges generally make similar judgments.

Liu Lei felt that after the 924 notification in 2021, the wind direction was strictly turned. From the 94 announcement in 2017 to the release of the 924 announcement in 2021, the "illegal" status of virtual currency-related businesses has gradually been recognized by relevant departments.

Specifically, in the 94 Announcement, the subject to be regulated and required is a specific institution - "all financial institutions and non-bank payment institutions shall not carry out business related to token issuance and financing transactions", the main warning and restriction at that time was ICO-related activities. And when it came to 924, the subject that was required and restricted actually directly became an individual, and directly pointed out that "virtual currency-related business activities are illegal financial activities, and such activities are strictly prohibited and resolutely banned in accordance with the law; if they meet the provisions of the "Criminal Law". Anyone who commits a crime shall be investigated for criminal responsibility according to law." And "virtual currency does not have the legal status consistent with legal tender."

After the 924 notice, although the "illegal" business activities related to virtual currency were established, it did not deny that virtual currency is a specific virtual commodity. In 2013, five ministries and commissions including the central bank issued a notice on preventing Bitcoin risks. Among them, when defining the attributes of Bitcoin, it is mentioned: "In terms of nature, Bitcoin should be a specific virtual commodity, which does not have the same legal status as currency, and cannot and should not be used as currency in the market. .” Here, Bitcoin is defined as a virtual commodity, and a virtual commodity is a kind of property.

Liu Lei clearly remembers that before the 924 notice came out, the judge would also discuss what Bitcoin is, whether it is a thing or property, and whether it is protected by law.

For example, in a criminal case, the Higher People’s Court of Guangdong Province rejected the appeal on the grounds that: “Bitcoin” is an online virtual commodity, not a currency, but there is an objective transaction fact between it and the real currency on the Internet, and it can be converted. The attribute of real material interests should be recognized as property in terms of legal attributes. In real life, "Bitcoin" is no longer recognized by the public as the data of its original physical attributes, but is pursued as wealth. There are professional "Bitcoin" trading websites, and the general public can hold "Bitcoin" and participate in transactions.

But after the 924 notice comes out in 2021, this kind of discussion can't be avoided. During the trial of the case mentioned at the beginning of the article, the judge avoided talking about whether Ethereum was property.

The trial results of cases involving virtual currency have become a metaphysics. Sometimes judges will rule that the contract is valid, sometimes invalid, sometimes support the return of virtual currency, and sometimes not. In many cases, what lawyers have to do is to give the magistrate popular science first, from the simplest virtual currency transfer wallet address to what virtual currency should be defined in law, so that the judge can make a relatively reasonable judgment.

Lawyer Liu Yang believes that it is precisely because virtual currency is not recognized as property in specific civil judicial practice, so the rights and interests related to virtual currency are difficult to protect through existing judicial channels. In order to deal with civil disputes related to virtual currency, Liu Yang’s litigation strategy is to downplay the “property rights” of virtual digital currency as much as possible. For specific cases, virtual currency can be defined as “things” and the path of “property rights” can be used to help entrust human rights. In addition, the effect of choosing arbitration will be better. He once represented an arbitration case, and the arbitration tribunal determined that the entrusted investment in virtual digital currency "contract is valid".

Power rent-seeking space

The world of the blockchain is a dark forest, and the world on the chain is always obscure when it comes to judicial practice when conflicts and collisions occur between off-chain and off-chain people and things.

When it comes to criminal cases, this kind of ambiguity is similar to the fact that the victim's digital currency has been defrauded. The public security organs often bear the loss of investing in virtual currency and directly refuse to file a case. When it comes to the cases involving pyramid schemes and fund-raising fraud that the public security organs want to crack down on, the public security organs investigate very hard. And from the perspective of criminal defense, Liu Yang felt that the difficulty of defense became more and more difficult.

In the past two years, there has been a wave of frozen cards, and it is not uncommon for various exchanges and project parties to be arrested. For people in the industry, encryption has become a high-risk industry, and the safety of personal and property cannot be guaranteed.

In 2018, Liu Lei received his first case in the blockchain industry. His friend's card was frozen due to withdrawal, and he hoped he could help unfreeze it. Now, withdrawing gold freezing cards has become normalized, but at that time, it was still a new business for lawyers.

The logic and basis for the public security organs to freeze the card is that they found that the funds involved in the case were "suspected to be guilty" during the process of handling the case. But they do not have a complete judicial process to determine whether the money is "guilty", and as a person whose card has been frozen, there is no legal remedy to appeal their money "innocence". From whether to freeze the card to whether to unfreeze it depends on the judgment of the case handlers. The process for lawyers to unfreeze is to negotiate with the investigators, list the evidence and reason to tell the investigators that Qian is "not guilty", but because there are no specific rules and appeal channels, the consequence is that there is a lot of room for rent-seeking power.

Similar to the unfreezing of frozen cards, there are also cases involving exchanges that really test the negotiation skills of lawyers. Over the years, Liu Lei has taken on many cases of exchanges. The exchanges we are talking about are like OKEX and Binance, which have obtained licenses in other countries and have withdrawn domestic users in accordance with the requirements of the Chinese government. However, some operating entities , The staff stay in the domestic exchange. Although domestic users are prohibited from using it, domestic users can still use VPN and other means to bypass the restrictions of the platform.

At present, cases involving such exchanges generally involve the following three charges: 1. The crime of illegal business operation 2. The crime of organizing and leading pyramid schemes 3. The crime of opening a casino. Specifically, some local judicial organs interpret contracts as futures and deal with them as crimes of illegal business operations. Some interpret the contract as gambling and treat it as opening a casino. Some people think that the exchange’s newcomer rebates are pyramid schemes. They regard the exchange as the first layer, the users as the second layer, and the newcomers brought in by the users as the third layer. This conforms to the definition of “three-tier distribution” in pyramid schemes. .

Liu Lei feels that, given the high complexity of the virtual currency exchange and the coin-issuing project party, defense lawyers can still win a relatively large amount in such cases under the background of the current system of lenient pleas and punishments. Space for defense; these spaces are either reflected in sentencing, or in illegal gains and fines.

From another perspective, under the environment of local fiscal tightening, the handling of criminal cases related to virtual currency has undoubtedly become a sweet pastry for local governments to generate income.

For individuals who violate the law and commit crimes, there are of course legal loopholes that can be exploited in the chaos. Illegal crimes will become easier because they are in the blockchain world, and they will also escape punishment due to the lag of relevant laws in reality.

Liu Yang had a case in which a client was accused by the company of embezzlement. At first, the public security organ filed the case for the crime of embezzlement, but the procuratorate approved the arrest for the crime of illegally obtaining computer information system data. Liu Yang believed that the change of the alleged charges was due to the crime of embezzlement It is the property of the company that is required to be embezzled, but the actual situation of blockchain companies is that most of them will use virtual currency as a method of payment and settlement for business transactions, but it is difficult to define whether the wallet address belongs to the company or the actual controller, and This address is certainly not the company's public account address as recognized by current law.

In terms of legal punishment, the maximum penalty for the crime of occupational embezzlement can be indefinite if the amount is particularly large, while the maximum penalty for the crime of illegally obtaining computer information system data is only seven years.

The Future of Blockchain Industry Law

Before becoming a lawyer, Liu Yang worked in the public security system for many years. In 2018, he stepped into the road of blockchain-related criminal defense. He obviously felt that after the big bull market in 2020, the attitude of the police has changed a lot when investigating blockchain-related cases. At that time, a large amount of off-market funds entered the market, which also attracted a large amount of black money. Although the country does not recognize virtual currency as currency, when it comes to specific cases, the investigators all know that virtual currency is real money, and there were indeed many chaos in the industry at that time, such as fundraising, pyramid schemes, and illegal fundraising. Therefore, the police pay more attention to criminal cases involving virtual currency.

Moreover, most of the police believe that the currency circle has a congenital original sin, preconceived that it is suspected of illegal crimes, and will work harder in the investigation.

An anti-fraud policeman told the Jinse Finance reporter that in the actual process of handling the case, they found that the most popular money laundering method in underground banks is USDT, which is an extremely covert money laundering method. Regarding virtual currency, he and the police around him have always shown a negative attitude, but in his heart, he always believes that virtual currency cannot escape the vicious circle of the Ponzi scheme.

It is undeniable that virtual currency is often associated with crimes such as money laundering and pyramid schemes. According to statistics from Okey Cloud Chain Research Institute, money laundering, fraud, pyramid schemes, and gambling are the four most common forms of virtual currency crimes in 2022. , of which 54.72% of virtual currency crimes are related to money laundering, and 21.13% are related to fraud.

In the past two years, more and more virtual currency money laundering cases have been cracked by the police. For example, the so-called "National Virtual Currency First Case" was cracked. The settlement involved more than 400 billion yuan in turnover.

Most of the time, virtual currency is involved in the last step of illegal crimes: money laundering, and there are also pyramid schemes that directly involve virtual currency. 200 copies.

According to common sense, virtual currency money laundering should be difficult to be traced to real individuals, but in the process of cracking the "National Virtual Currency First Case", the issuer of the stablecoin used by the criminal gang to launder money is looking for funds It plays an important role when it comes to the trajectory.

Jinse Finance reporters combed through the Judgment Documents Network and found that some criminal case verdicts show that in the process of the police solving the case, centralized exchanges such as Huobi and Binance will also provide transaction records related to the criminal. It is reported that at present, some security companies in the industry and stable currency issuers will cooperate with the police.

Although we often say that the blockchain is decentralized and is a paradise for anarchists. But in fact, there is no way for the blockchain to become a completely extralegal place. When the blockchain and the real world are linked, friction will inevitably arise. And there are still people behind every blockchain project, and you can't "surge" on the chain, you can directly "surge" on the centralized organization. To achieve off-chain supervision, this is something that the government does not want to do, and it is not difficult or difficult to do.

If you don’t talk about off-chain supervision, blockchain technology itself is also a technology for good. The background of the technology is to fight against the existing financial system, and it protects people’s private property, personal information security, and so on. It is definitely the mainstream of the development of blockchain technology to draw a clear line from money laundering and pyramid schemes. When the influence of the blockchain world is increasing, the collision with the real world will become more and more violent, and the road of compliant development has become the only way.

The soundness of relevant laws is the basic path that can not only crack down on real illegal crimes, but also protect people's related rights and interests.

In April this year, the Supreme People's Court issued the "Minutes of the National Court Financial Adjudication Work Conference (Draft for Comment)" (hereinafter referred to as the "Minutes"). A response was made, clarifying that disputes arising from entrusted investment in virtual currency should be comprehensively judged and considered in consideration of factors such as the time of entrustment, the reason for the occurrence of the entrusted matter, and the degree of fault of both parties.

Regarding the court’s judgment on the delivery of virtual digital currency, Article 87 of the Minutes stipulates that “for the parties’ claims for the delivery or return of “virtual currency” such as bitcoin, the people’s court shall ascertain the status of the virtual currency held, and clarify whether it is There is the possibility of delivery or return, and it shall be stated in the document. If it is determined through trial that it cannot be returned or delivered, the parties shall be guided to make reasonable claims, and the parties shall be encouraged to reach an agreement on the property rights. After the trial, it is found that there is an actual basis for performance If the people's court clearly delivers or returns the virtual currency in the judgment according to the party's claim, and the party with the obligation to deliver or return refuses to perform the obligation determined by the effective judgment, the people's court may take corresponding measures in accordance with the relevant provisions of the Civil Procedure Law on enforcement procedures. "

According to the provisions of this article, it is clear that the demand for the return of virtual currency can be supported, and the refusal to perform will also bear certain legal consequences.

Liu Lei feels that, theoretically, this summary will provide guidance for the enforcement of the case proposed at the beginning of the article: for example, will the losing party of the unenforceable virtual assets be brought to the dishonest executor?

There are more and more legal disputes and criminal cases involving the blockchain field, and the relevant judiciary will surely keep up. However, the maintenance of the blockchain world order is difficult to fully monitor human nature by relying solely on codes. Code can be law, but law in reality is just as important.