Can I protect my rights if I lose $1 million from a contract liquidation on a virtual currency exchange?

The world of emerging technologies such as Web3.0 and blockchain is very exciting. New fields will inevitably bring new wealth opportunities. Some people who enter new fields do so for their ideals and to change the world; some do so to catch a glimpse of wealth and want to become the "big guys" that some people admire as soon as possible.

Pursuing wealth is not a "political mistake". Some of the progress in human history was made by people who only wanted to pursue wealth. But accumulating wealth in the right way is absolutely "politically correct". For example, when playing contracts in a virtual currency exchange, you must know how to "correctly protect your rights" to minimize your losses.

Lawyer Liu encountered such a case: a Chinese client, introduced by a friend, played contracts on a virtual currency trading platform, and the cumulative liquidation loss reached as much as 1 million US dollars. The client suspected that he was cheated by a scam. In this case, can the client protect his rights?

The answer is of course: Yes! But you need to know the correct way to protect your rights. This requires us to talk about it from the following aspects:

0 1Determine the exchange attributes

The premise for safeguarding rights according to law is that our country’s laws have jurisdiction over the disputes involved, so it is crucial to determine the attributes of the exchange.

Since the issuance of the "Notice on Preventing Bitcoin Risks" (Document No. 289), the "Announcement on Preventing Token Issuance and Financing Risks" (9.4 Announcement), and the "Notice on Further Preventing and Dealing with Virtual Currency Trading Speculation Risks" (9.24 Notice), it has become a consensus for the cryptocurrency circle to go overseas. If the exchange is registered in other countries or regions, then our country's laws will be out of reach, and the difficulty of safeguarding rights will increase.

If the exchange is registered in China, the probability of successfully defending rights will be relatively higher. Generally speaking, the exchange's place of registration can be basically determined by checking the exchange's official website introduction, website IP address, and the description of the exchange in the "Service Agreement" when registering a trading account.

0 2 Determine whether Chinese mainland law applies

For exchanges registered in China, of course, the application of Chinese law is given priority; for overseas exchanges or exchanges that clearly stipulate in the "Service Agreement" that they shall be subject to foreign legal jurisdiction ( such as the "Service Agreement" of EU-Italy, which stipulates that relevant disputes shall be arbitrated by the Hong Kong International Arbitration Center and shall be subject to Hong Kong law ), in principle, the agreement shall prevail, but the jurisdiction of the courts in mainland China cannot be completely excluded.

According to Article 272 of my country's Civil Procedure Law, in property rights disputes, if the defendant has no residence in my country, but the contract is signed or performed in my country, or the defendant has a representative office in my country, the case may be under the jurisdiction of the courts of the place where the contract is signed, the place of performance, the place of infringement, the place of residence of the representative office, etc.

The above-mentioned “place of performance” certainly includes the residence of the payee (the victim); the “place of infringement” certainly also includes the place where the infringement occurred (which is also the victim’s residence). In other words, even for overseas exchanges, it does not necessarily exclude the application of Chinese law.

However, one reality that cannot be ignored is that the natural reaction of many courts in cases involving virtual currencies is to reject them. The fundamental reason is that there is insufficient legal basis. In addition, even if the rights defenders win the case against overseas exchanges or other institutions or individuals, how to enforce it is also a difficult dilemma to overcome (overseas + legal attribute issues of virtual currencies).

0 3 "Three-step method" for rights protection

In view of the above-mentioned difficulties in protecting rights, we have specifically proposed the " Three-Step Rights Protection Method " to help victims better protect their rights.

Anyone who has a little knowledge of virtual currency exchanges will know that the so-called "going overseas" of the cryptocurrency circle in recent years is just moving the server overseas for some institutions. Some teams will symbolically "hire" some overseas agents (the actual bosses are still in the country), and some team members do not even need to go overseas in person.

In normal market risks, most rational people will just accept the loss of their contracts. However, if someone (even the exchange) is involved in the scheme and they are being ripped off, and they keep silent, then it is really "no one is a real man". If you are not sure whether you have been ripped off, you can consult a professional lawyer.

Defending your rights also requires courage, determination and wisdom. If you happen to possess the former (the "wisdom" part can be entrusted to a professional lawyer), you can follow the steps below:

Step 1: Determine the information of the actual controller, agent, bank account holder and other relevant persons of the illegal exchange (hereinafter referred to as the "rights protection object"). According to our team's experience in handling cases, victims, especially "senior victims" (those who have been victims for a long time and have suffered a large amount of losses, etc.) can generally accurately identify the rights protection object, including but not limited to their name, contact information, office address, even address, ID number and other information; if the aforementioned information is not available, a lawyer can be entrusted to sort out the relevant evidence and retrieve it.

Step 2: Contact the rights protection object for consultation and negotiation. Before starting this step, the victim needs to organize relevant evidence materials, including trading account information, transaction flow, identity or subject information of the exchange and the rights protection object, chat/call records (especially if the rights protection object has evidence of shouting orders, inducement transactions, etc.). In practice, if a strong victim or a group of victims defend their rights, it can generally bring a certain amount of pressure to the rights protection object, and they are also willing to compensate the victim for part of the loss; if the rights protection object is also very strong, or the amount of compensation does not meet the victim's expectations, it is necessary for professional lawyers to intervene. In our actual case handling, lawyers will be more targeted and professional when negotiating with the rights protection object, and the claims raised by the lawyers are also more valued by the rights protection object. In practice, there are many cases in which rights protection negotiations intervened by lawyers have helped victims recover 50% or even the full amount of their losses.

Step 3: Initiate litigation (criminal charges, civil prosecution). In the event that consultation and negotiation have not made effective progress, the victim should promptly initiate litigation procedures, with criminal charges as the first priority and civil prosecution as the supplement. Relying on the evidence materials in the second step, the victim should consider fraud, fund-raising fraud, illegal absorption of public deposits, illegal business operations, assistance in information network criminal activities, illegal use of information networks and other crimes in the local public security organs according to the individual case. In practice, some rights protection objects will take the initiative to contact the victim to discuss compensation matters without waiting for the formal filing of the case after the public security organs accept the complaint. After the case is filed, if the rights protection object wants to get a chance for lenient treatment, most of them will take the initiative to return the compensation to obtain the victim's understanding. However, if the public security does not file a case, the victim can only go through the procedure of civil prosecution. Civil litigation generally takes a long time, and the possibility of obtaining compensation is smaller than the probability of criminal charges. There are also cases where the court will not accept the case.

Whether it is a criminal complaint or a civil lawsuit, we do not recommend that victims DIY. After all, judicial activities require a high level of professional knowledge and practical experience. In principle, judicial relief is based on the principle of "non-binding": once a criminal complaint or civil lawsuit is not accepted or the lawsuit/claim is rejected, it basically declares the end of the judicial relief procedure. Therefore, the third step of rights protection is best carried out under the guidance of a professional lawyer.

0 4 Conclusion

The myths of the cryptocurrency world are often created by the hard-earned wealth of countless leeks. Investment is risky, and you should always keep this in mind in the cryptocurrency world. Of course, if you must try, please be sure to keep in mind the risk warnings in this article to lay a solid foundation for your future rights protection.