38 million digital currency money laundering case: 4 people born after 1995 resold Tether and took 110,000 commissions. How should the sentence be determined?

He was sentenced to one and a half years in prison for making illegal profits of 45,000 yuan. In addition to confiscation of the illegal gains, he was also fined 10,000 yuan. The fraud gang behind him was at large with the "laundered" USDT (Tether). This was the life of Li Yuan (pseudonym) at the age of 26. The other three people who were directly or indirectly pulled in by him had the same ending. The four people laundered a total of 38 million yuan.

In recent years, with the rapid development of the information society, the structure of crime has undergone major changes . Traditional crimes have continued to decline, and new cyber crimes represented by telecommunications network fraud have become mainstream crimes. In April this year, Liu Zhongyi, director of the Criminal Investigation Bureau of the Ministry of Public Security, said at a press conference of the State Council Information Office that fraud groups use new technologies and new formats such as blockchain, virtual currency, AI intelligence, GOIP, remote control, and shared screens to continuously update and upgrade criminal tools, and the offensive and defensive confrontation with public security organs in communication networks and money laundering transfers has continued to intensify and escalate.

Liu Zhongyi introduced that from the perspective of funding channels, the proportion of money laundering through traditional third-party payment and corporate accounts has decreased, and the extensive use of running points platforms and digital currencies for money laundering, especially the use of Tether, is the most serious harm.

In the same month, the China Judgments Online website also disclosed the "Criminal Second-instance Ruling of the Intermediate People's Court of Zhuzhou City, Hunan Province (hereinafter referred to as "Zhuzhou Intermediate Court") on the crime of assisting information network criminal activities by Li Yuan, Jiang Wei (pseudonym) and others. The trial document detailed the means by which the fraud gang used Tether to launder money, as well as the training of "cannon fodder".

2.8% commission

In December 2018, 23-year-old Li Yuan joined a company called "Casna" in Shenzhen. With a bachelor's degree, he was just starting out. His job at the company was to use the company's and his own bank cards to sell Tether online to help others launder money and earn commissions.

The specific operation is that Li Yuan purchases a certain amount of Tether in the Huobi APP and transfers it to the "pex" order-taking platform (hereinafter referred to as the "platform"). The platform assigns orders based on the amount of Tether in Li Yuan's account. The funds will be transferred to the bank card bound to Li Yuan's account and used to purchase Li Yuan's Tether.

When Li Yuan resells Tether to buyers through the platform, the price will be about 2 cents higher than when he bought it on Huobi. Therefore, Li Yuan can make a profit of about 200 yuan by taking an order for 70,000 yuan of funds on the platform.

Before the operation, Li Yuan needs to register on the platform and Huobi APP and bind his bank card to accept orders.

As the domestic crackdown on telecommunications and Internet fraud and anti-money laundering supervision become stricter, such a "business" is destined not to last long.

From January to February 2019, Li Yuan had several bank cards frozen by law enforcement agencies, and related victims reported that money was transferred to bank cards under his name. The bank cards of his colleagues in the company were also frozen, so the boss dissolved the company.

The dissolution of the company and the freezing of his bank card did not stop Li Yuan.

In February 2019, Li Yuan brought in Jiang Wei, who was also born in 1996 in Hunan, to continue reselling Tether on the platform. In a rental house in Shenzhen, Li Yuan was responsible for providing funds, while Jiang Wei used his own bank card to bind the platform to be responsible for operations. The profits were divided between Li Yuan and Jiang Wei in a ratio of 4:6.

"The reason why some people are willing to spend money to buy Tether from a less well-known and more expensive platform is because the funds used to purchase it are irregular and illegal." Jiang Wei later confessed that although he knew that the funds used to purchase Tether were irregular and illegal, he owed an online loan and wanted to make money this way.

In April 2019, Li Yuan, Jiang Wei and others moved from Shenzhen to Changsha, and continued to resell Tether in a rental house in Changsha. In June, they mobilized Xiao Daguang (pseudonym) to use his own bank card to operate in the same way of investment and profit sharing.

After obtaining the "secret to making money", Xiao Daguang began to become independent.

In March 2020, Xiao Daguang, born in 1997, taught the method to Xiao Xiaoguang (pseudonym), who was only 18 years old. The two invested together and used Xiao Xiaoguang's bank card to bind the platform to resell Tether. The profits were distributed between Xiao Daguang and Xiao Xiaoguang in a ratio of 4:6 until September 2020.

According to the subsequent confessions of the above-mentioned four people, they all admitted that they were aware that the money on the platform was illegal when they participated, and that the bank cards might be frozen after the money was transferred to the cards.

As the number of victims behind the misappropriation of funds increases, law enforcement agencies have begun to take action, and the "cannon fodder" attached to this fraud industry chain has been hit hardest.

On April 1, 2021, Li Yuan was arrested and brought to justice; on April 7, 2021, Jiang Wei was arrested and brought to justice; on April 11, 2021, Xiao Daguang and Xiao Xiaoguang voluntarily surrendered; there are still two accomplices at large.

Upon investigation, it was found that Li Yuan used 4 of his bank cards to carry out the above-mentioned acts, with a total of more than 8.34 million yuan in funds transferred in; Jiang Wei used 13 of his bank cards to carry out the above-mentioned acts, with a total of more than 7.81 million yuan in funds transferred in; Xiao Daguang used 5 of his bank cards to carry out the above-mentioned acts, with a total of more than 15.77 million yuan in funds transferred in; Xiao Xiaoguang used 4 of his bank cards to carry out the above-mentioned acts, with a total of more than 6.11 million yuan in funds transferred in. The total amount of unilateral transactions of the above-mentioned 4 persons reached 38 million yuan.

In the end, Li Yuan made an illegal profit of 45,300 yuan; Jiang Wei made an illegal profit of 13,100 yuan; Xiao Daguang made an illegal profit of 38,500 yuan; and Xiao Xiaoguang made an illegal profit of 10,300 yuan. The total illegal income was 107,200 yuan.

On December 21, 2021, the People's Court of Liling City, Hunan Province made the criminal judgment No. (2021) Xiang 0281 Xingchu 479, determining that the above four people were all guilty of "assisting in information network criminal activities" without distinction between principal and accessory; the illegal gains were recovered and confiscated and turned over to the state treasury.

In addition, Li Yuan was sentenced to one year and six months in prison and a fine of 10,000 yuan; Xiao Daguang was sentenced to one year in prison and a fine of 10,000 yuan; Jiang Wei was sentenced to nine months in prison and a fine of 5,000 yuan; and Xiao Xiaoguang was sentenced to seven months in prison and a fine of 3,000 yuan.

After the verdict was announced, Li Yuan and Jiang Wei were dissatisfied and filed an appeal. Among them, Jiang Wei and his defense lawyer mentioned that objectively, Jiang Wei’s sale of Tether could not be identified as payment settlement; Jiang Wei’s trading of Tether did not constitute a crime, and the upstream crime was not verified. The first-instance judgment based on Jiang Wei’s total turnover of 7.81 million yuan was wrong to determine his illegal income.

The source of the 38 million yuan in funds

Why is there a defense of "unverified upstream crimes"? This has to start with the source of the cash flow.

Of the nearly 38 million yuan in transaction flows, the court was able to confirm that only 310,000 yuan was defrauded with clear victims.

For example, at 15:00 on June 11, 2020, the victim Luo downloaded an app called East Asia Securities to trade stocks and filled in the information on the app. On June 16, 2020, Luo transferred 50,000 yuan to the Construction Bank account named Xiao Xiaoguang provided by the app. On the 17th, Luo found that the downloaded app could not be logged in and his WeChat account was blocked, and he realized that he had been cheated.

This is one of the upstream criminal facts. After the amount of fraudulent funds successfully matched the value of Tether in Xiao Xiaoguang's account on the platform, the order was displayed as accepted, and the upstream fraud account was displayed as Xiao Xiaoguang's account. After the fraudulent funds entered Xiao Xiaoguang's account, the fraud team took the Tether and hid in the dark web.

At the beginning of 2022, the Zhuzhou Intermediate People's Court formed a collegial panel in accordance with the law. After reviewing the case files, questioning the defendant, and listening to the opinions of the defense counsel, it was found that the facts of the case were clear and ultimately decided not to hold a trial for the case. The trial has now ended.

In response to the appeal opinions of Jiang Wei and his defense counsel, the Zhuzhou Intermediate People's Court stated in its criminal ruling that Li Yuan, Jiang Wei, Xiao Daguang and others provided their own bank card binding platforms and, through operations such as reselling Tether, objectively provided payment settlement assistance for others to transfer funds for criminal purposes.

In determining the threshold for conviction, the Zhuzhou Intermediate People's Court pointed out that according to Article 12, Paragraph 1 of the Supreme People's Court and Supreme People's Procuratorate, "payment settlement amounts of more than 200,000 yuan or illegal gains of more than 10,000 yuan constitute serious circumstances"; Article 12, Paragraph 2 stipulates: "Due to objective conditions, it is impossible to verify whether the assisted object has reached the level of crime, but the total amount of the relevant amount reaches more than five times the standard specified in the preceding paragraph, or causes particularly serious consequences, the criminal responsibility of the perpetrator of the crime of assisting information network criminal activities shall be investigated."

In addition, according to the provisions of the "Opinions on Several Issues Concerning the Application of Laws in Handling Criminal Cases Such as Telecommunications Internet Fraud" issued by the Supreme People's Court, the Supreme People's Procuratorate and the Ministry of Public Security, defrauding public or private property of more than 3,000 yuan constitutes the crime of fraud.

"This case is serious both in terms of payment settlement amount and illegal income amount, and a total of 3.12515 million yuan was defrauded of funds in this case. The assisted persons in this case have reached the threshold for conviction of fraud." The Zhuzhou Intermediate People's Court held that Li Yuan and Jiang Wei were subjectively aware that others were using information networks to commit crimes, and objectively provided payment settlement assistance for others to commit crimes. The circumstances were serious, and the assisted persons used information networks to commit crimes, reaching the threshold for conviction of fraud, and met the constituent elements of the crime of assisting information network criminal activities.

In addition, the Zhuzhou Intermediate People's Court stated that Li Yuan, Jiang Wei and others withdrew commissions based on the amount of money transferred, that is, 2.8 per thousand of the bank flow amount. Therefore, the first-instance judgment to recover their illegal gains based on the unilateral transaction flow amount is in line with the law.

Liu Zhongyi also introduced at the above-mentioned press conference that in telecommunications network fraud crimes, the leaders of the fraud groups use overseas chat software to direct domestic personnel to engage in various illegal crimes such as APP production and development, traffic diversion and promotion, buying and selling information, transfer and money laundering. The connection between domestic and foreign countries is close, and the characteristics of transnational organized crime are becoming increasingly obvious.