Why can I get a refund if I buy a mining machine with legal currency, but I will lose the case if I use USDT?

introduction

2021 is the year of the bull market in the cryptocurrency circle, and it is also the year when a large number of novices rushed into the cryptocurrency circle to buy mining machines for mining. According to the provisions of the Civil Procedure Law, the statute of limitations for civil cases is 3 years. Looking back, more than two years have passed since 2021!

The case I want to share with you today is a fresh case of a mining machine sales contract dispute in August 2023. In the first instance of this case, the investor (buyer) won, but the second instance changed the verdict to the miner (seller). If you are an investor, don't panic, Lawyer Guo will analyze how the buyer won at the end. I don't know if you still remember the "First Mining Case in Shenzhen". The picture above is the final judgment of the "First Mining Case in Shenzhen" represented by Lawyer Guo. Since the judgment of the "First Mining Case in Shenzhen" in 2022 (referring to the first virtual currency mining case in Shenzhen that has been judged after the issuance of the "Notice on the Rectification of Virtual Currency "Mining" Activities" on September 24, 2021), the judgment trend of virtual currency mining contract disputes in Shenzhen has been basically established.

After that, although there were further provisions in the "Minutes of the National Court Financial Trial Work Conference (Draft for Comments)" (hereinafter referred to as the "Financial Trial Minutes") issued by the Supreme Court in January 2023, the time point of the issuance of the "Notice on Regulating Virtual Currency "Mining" Activities" is used as the basis for judging whether the contract is valid, while considering fault liability.

Article 85 of the Minutes of the Meeting states: [Disputes related to "mining"] Virtual currency "mining" refers to the process of calculating and producing virtual currency through special "mining machines". From the perspective of case trials, disputes caused by "mining" can be summarized into two types. One is that the parties purchase or lease mining machines that produce virtual currency in order to obtain virtual currency through mining activities, and disputes arise over the payment of mining machines; the other is a cooperative model that integrates multiple legal relationships such as mining machine sales, cooperative profit sharing or trusteeship services. For example, the parties jointly invest in the purchase of mining machines and agree to share profits after obtaining virtual currency, but later a dispute arises because the seller fails to deliver or share profits. "Mining" activities are gradually subject to strict control and orderly withdrawal due to their high energy consumption and carbon emissions, low contribution to the national economy, and limited driving effect on industrial development, scientific and technological progress, etc. When hearing cases, the people's courts should reasonably balance the rights and obligations between the parties based on the degree of impact of public policies on contract performance in different periods. Before the issuance of the "Notice on Rectifying Virtual Currency "Mining" Activities" (September 3, 2021), national policies did not explicitly prohibit mining activities. If the parties previously agreed to buy, sell, lease, and keep "mining machines" or provide additional services such as operation management, technology development, etc., and the parties request to confirm the invalidity of the contract on the grounds that the subject matter or purpose of the contract is illegal during the litigation, the people's court will not support it. If the contract cannot be performed subsequently due to the introduction of policies, and one party proposes to terminate the contract, the people's court should support it. After the contract is terminated, if it has not been performed, the performance shall be terminated; if it has been performed, the parties may request restoration of the original state or take other remedial measures according to the performance and the nature of the contract, and have the right to request compensation for losses. For contracts in which the parties agree to buy, sell, lease, and keep "mining machines" or provide additional services such as operation management, technology development, etc. after September 3, 2021, the people's court shall determine that the contract is invalid. During the trial of the case, if one party sues to confirm the validity of the contract and requests to continue to perform the contract, and the other party claims that the contract is invalid, or if one party sues to confirm the invalidity of the contract and return the property, and the other party claims that the contract is valid, the people's court should explain to the plaintiff to change or increase the litigation request, or explain to the defendant to propose a simultaneous performance defense, and try to resolve the dispute at one time. If the parties change their claims or raise objections in accordance with the explanation, the people's court shall summarize them as the focus of the case's dispute and organize the parties to fully present evidence and cross-examine each other.

However, just when Lawyer Guo thought that such judgments across the country would converge, a second-instance judgment from the Shenzhen Intermediate People's Court did not completely refer to the "Minutes of Financial Trials" of the Supreme Court. Of course, this is not necessarily wrong. After all, the current "Minutes of Financial Trials" is still in the stage of soliciting opinions and has not yet fully come into effect. However, it can also be seen from this that Shenzhen's judgments still have their own "tone". Of course, from the perspective of the defendant (mining company) represented by Lawyer Guo, Lawyer Guo still won the case. However, even though Lawyer Guo is the winner, he still believes that some of the legal basis for the judgment is still debatable. Let's take a look at the specific situation first.

I. Basic Facts of the Case

On April 18, 2021, the plaintiff and the defendant (miner) signed the "CHIA Server Hosting Agreement", stipulating that the defendant would provide the plaintiff with 3P computing power server hosting services for a consideration of RMB 870,000. Immediately after the contract was signed, the plaintiff paid the defendant 127,008 USDT (equivalent to RMB 870,000, which both parties agreed to). Afterwards, the defendant only delivered 800T of computing power on June 9, 2021, and the computing power was only maintained for more than a month before all deliveries were stopped. On September 2, 2021, the plaintiff sued the miner to the People's Court of Luohu District, Shenzhen, demanding that the miner return the RMB 870,000 purchase price. In March 2022, the Luohu Court ruled in favor of the plaintiff at first instance, and the defendant should return RMB 870,000 to the plaintiff. Subsequently, Lawyer Guo appealed on behalf of the defendant, and the second instance finally changed the judgment to the defendant (miner) in favor.

2. Core controversy: Can USDT be converted into RMB?

Based on the debates and judgments of the first and second trials, the core dispute in this case is whether virtual currency can be converted into RMB. The plaintiff believes that it can be converted, while the defendant represented by Attorney Guo believes that it cannot be converted.

At the time of the first instance of this case, there was no domestic law that stipulated that virtual currency could not be converted into RMB, although there were the "Announcement on Preventing the Risks of Token Issuance and Financing" (hereinafter referred to as the "94 Announcement") and the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" (hereinafter referred to as the "924 Notice"), which stipulated that no platform should engage in the exchange business between legal currency and tokens, virtual currency, or buy and sell tokens or virtual currency or act as a central counterparty to buy and sell tokens or virtual currency, or provide pricing, information intermediary and other services for tokens or virtual currency. However, there was no direct provision that virtual currency has no value, and these two documents were not legal provisions, but only policy documents. At the same time, when the miners were trading, they also confirmed in the chat records that 127,008 USDT was equivalent to 870,000 RMB, which means that there was also an anchoring standard for the price of virtual currency. Therefore, the court of first instance ordered the defendant to return 870,000 RMB to the plaintiff.

However, during the second instance of this case, after repeated communications with Lawyer Guo, the second instance court held that "the first instance court's ruling that the defendant should return RMB 870,000 to the plaintiff is essentially a disguised support for the redemption and transaction between virtual currency and legal currency", supporting Lawyer Guo's point of view.

Why is there such a big difference between the first instance and the second instance? In fact, there is a small episode here. On December 30, 2022 (after the first instance), the Supreme Court issued Guiding Case No. 199, "Gao Zheyu and Shenzhen Yun Silk Road Innovation Development Fund Enterprise and Li Bin Apply for Revocation of Arbitration Award", which happened to be a case handled by the Shenzhen Intermediate People's Court. The original text clearly mentioned that "the arbitration ruling in the case that Gao Zheyu compensated Li Bin with US dollars equivalent to Bitcoin, and then converted the US dollars into RMB, in essence, supported the payment and transaction between Bitcoin and legal tender in disguise, which is inconsistent with the spirit of the above-mentioned documents and violates the public interest of society. The arbitration award should be revoked." It is not surprising that this case can be designated as a guiding case, because this case was finally ruled by the Shenzhen Intermediate People's Court after being approved by the Supreme Court. In addition, this case occurred after the first mining case in Shenzhen, and the first mining case in Shenzhen provided the same theoretical basis for this case.

Therefore, when Lawyer Guo submitted the precedent of the first mining case in Shenzhen and Guiding Case No. 199 to the collegial panel, he basically secured victory in the second instance.

3. Two shortcomings of this case

Although the miners represented by Lawyer Guo ultimately won a great victory, there were still two important points of criticism during the trial of this case, which really made people feel unhappy.

● Complaint 1: The court took it for granted that the mining contract was necessarily invalid

Although neither the plaintiff nor the defendant debated the invalidity of the contract (from the defendant's perspective, Lawyer Guo believed that the invalidity of the contract was the most favorable, but from the plaintiff's perspective, the invalidity argument was a bit like picking up sesame seeds and losing watermelons, which will be analyzed later), the courts of first instance and second instance should still determine whether the contract was valid based on their authority.

In this case, the second-instance court did not comment on whether the contract was valid. The first-instance court did not cite another document issued on September 24, 2021, "Notice on the Rectification of Virtual Currency "Mining" Activities" as it did in the past, but based it on the "924 Notice", believing that the actions of both parties were illegal financial activities and therefore invalid. As to why the actions of both parties were illegal financial activities, it was not discussed in detail. Here is a point of knowledge to add. The "924 Notice" does stipulate that all virtual currency business activities are illegal financial activities, but are all business activities involving virtual currency? Are they directly deemed invalid?

In addition, the contract between the two parties was signed at the end of April 2021, and the earliest that the country cracked down on mining was the end of May 2021. It was clearly defined as a high-energy-consuming industry on September 24, 2021. It is obviously unreasonable to judge the facts of past cases based on future policy documents. Combined with the provisions of the "Minutes of Financial Trial", at least September 3, 2021 should be used as a time node for determination. Therefore, putting aside the identity of the agent lawyer, Lawyer Guo still believes that the judgment of the invalidity of the contract in this case is debatable.

● Complaint 2: The court did not focus on the performance of the contract by both parties

If the contract is valid, the performance of both parties reflects the extent of the responsibilities that both parties should bear. If the contract is invalid, according to Article 157 of the Civil Code, the responsibilities should also be divided according to the degree of fault and loss of both parties. Therefore, regardless of whether the contract is valid or not, the performance of the contract should be the focus of the review of this case. However, the courts of both instances in this case were limited to the issue of whether virtual currency should be discounted, and completely ignored the performance and fault liability of both parties. This resulted in two extreme judgments of one party winning or one party losing.

In reality, both the plaintiff and the defendant did have many serious faults. Of course, when the trial started, as the "sure winner" party, Lawyer Guo had no need to argue with the other party on this point. If he did, he would lose some money. But the court still had the obligation to investigate the performance of the contract according to its authority.

Although the final verdict of this case is that the defendant (miner) wins, is there really no hope for the plaintiff? Of course not. As a lawyer who has represented both plaintiffs and defendants and won many cases, there is still a law to rely on for victory.

If Attorney Guo is representing the plaintiff, he may not file a civil lawsuit directly, but will first try to negotiate with the miner or file a criminal complaint. You can search for "Four-step refund method" on Baidu, or you can check out such successful cases in previous articles.

If Attorney Guo represented the plaintiff, he would insist that the contract was valid and would not default to the invalidity of the contract just because of the many invalidity judgments such as the "First Mining Case in Shenzhen" and "First Mining Case in Beijing". After all, the Supreme Court's "Minutes of Financial Trials" has not given up yet, so what are you giving up? As long as the contract is valid, the miner should compensate for failure to perform the contract.

If Attorney Guo represented the plaintiff, he would definitely focus on providing evidence to prove that the miner did not fully perform its contractual obligations and that the miner had fault liability. In this way, regardless of whether the contract is valid or not, the miner should bear the corresponding responsibility.

If Attorney Guo is representing the plaintiff, and if the payment method is virtual currency such as USDT, Attorney Guo will definitely not ask for the conversion of USDT into RMB in the lawsuit request, but will ask the other party to return the corresponding amount of virtual currency. In this way, even if the virtual currency cannot be executed at present, once it is released for execution in the future, the judgment will always be valid. It should be noted that Article 87 of the "Minutes of Financial Trials" has already opened a loophole for the execution of virtual currency. Is the future far behind? At least it is better than asking for conversion and leading to a complete failure.

So, if you are the plaintiff, do you understand?