On February 24, the Supreme People's Court issued the "Decision on Amending the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Laws in the Trial of Criminal Cases of Illegal Fund-raising", which amended Article 2, Item 8 to: "Illegally absorbing funds through online lending, investment in shares, virtual currency transactions, etc."

Read the original article: The Supreme People's Court issued a newly revised criminal judicial interpretation on illegal fund-raising (with full text)

1. Why add virtual currency?

A relevant person in charge of the Third Criminal Tribunal of the Supreme People's Court explained that the revised "Interpretation" is based on the original provisions and combines new judicial practices and new forms of crime. It adds new types of illegal fund-raising behaviors such as online lending, virtual currency transactions, and financial leasing to the eighth and ninth items of this article respectively. At the same time, it adds an item "illegally absorbing funds by providing 'elderly care services', investing in 'elderly care projects', and selling 'elderly products'" as the tenth item, providing a basis for punishing illegal fund-raising crimes such as P2P, virtual currency, and elderly care in accordance with the law.

2. How to identify illegal fundraising?

The relevant person in charge of the Third Criminal Division of the Supreme People's Court explained that the revised "Interpretation" maintains the four identification requirements unchanged, and makes appropriate modifications to the first and second items of the first paragraph of the article in accordance with relevant legal provisions and judicial practice. The four standards are:

(1) Raising funds without permission from the relevant departments in accordance with the law or by using legal business methods;

(2) Publicizing to the public through the Internet, media, promotion meetings, leaflets, mobile phone messages, etc.;

(3) Commitment to repay principal and interest or provide returns in the form of currency, physical objects, equity, etc. within a certain period of time;

(IV) Raising funds from the general public, i.e., non-specific individuals in society.

Read the original article: The relevant person in charge of the Third Criminal Division of the Supreme People's Court answered reporters' questions on the criminal judicial interpretation of illegal fund-raising

3. Do daily trading activities involve illegal fund-raising?

Lawyer Liu Yang's interpretation: In essence, the virtual currency transactions we usually understand refer to currency transactions, legal currency transactions, contract transactions, etc. These virtual currency transactions do not meet the constituent elements of illegal fund-raising crimes, so this judicial interpretation does not apply. Of course, not applying this judicial interpretation does not mean that it does not meet the constituent elements of other crimes. For example, OTC behavior is very likely to constitute the crime of aiding and abetting or concealing criminal proceeds and the crime of profiting from criminal proceeds.

4. Will illegal fundraising begin to involve fundraising, ICO, financial management, etc. that only involve cryptocurrency transactions (not legal currency)?

This is a complex issue.

Lawyer Huo Yijie pointed out that in the past, it was difficult for mainstream judicial authorities to file cases against the above-mentioned behaviors. It is obvious that this judicial interpretation attempts to expand this scope, but it remains to be seen whether it can be implemented in the future. Lawyer Han Wubin pointed out that in judicial practice, there have been behaviors such as ICOs that only involve cryptocurrencies, and cases have been filed for illegal fundraising. This time, this behavior has been clarified to a large extent.

Lawyer Liu Yang pointed out that this judicial interpretation also clarified a core issue. In the case of illegal fund-raising, the nature of virtual digital currency is clearly defined as "funds" in the sense of criminal law, which is a major breakthrough. In the case of illegal fund-raising, the nature of virtual digital currency is clearly defined as "funds" in the sense of criminal law. With the increasing number of virtual digital currency cases, the previous defense viewpoints such as "virtual digital currency is not legally compensable, not property in the sense of criminal law, and cannot be valued" are meaningless in practice.

However, the newly revised criminal judicial interpretation on illegal fundraising issued by the Supreme People's Court still failed to solve the problem of determining the amount of illegal fundraising cases involving currency. Frankly speaking, this problem really has no solution. If price appraisals are conducted on virtual currencies, it violates the regulations of relevant departments. If price appraisals cannot be conducted on virtual currencies, there will be obstacles in determining the amount of the crime in practice.

Lawyer Sun Jun cited a case he personally experienced in his article: In 2020, a client found the author. The client invested in a cottage currency in March 2018. I remember that the investment was 100 Bitcoins and 3,000 Ethereums. The issuer’s coins plummeted within a week after they were listed on the exchange. The issuer only gave the client one-tenth of the cottage currency, and the remaining nine-tenths were issued in the next three years as agreed. Because the price of the currency almost dropped to zero once it was listed on the exchange, the client did not want the remaining coins and wanted the issuer to return the Bitcoin and Ethereum that had been invested. The issuer had a tough attitude and even spoke rudely to the investor. The client was very angry and found our law firm, hoping to assist in reporting the case. Our team assisted the client in sorting out all the evidence of the case. The facts were also very clear, and the chain of evidence was very clear. I found the police station to report the case. After listening to the client’s report, the police had no objection to the facts and evidence, but the entire public security bureau spent two or three months studying and studying, and finally did not file a case for us. According to the judicial interpretation released today, the Supreme Court has made it clear that those who illegally absorb funds through virtual currency transactions and other means shall be convicted of illegal absorption of public deposits and fund-raising fraud. Therefore, regarding virtual currency transactions, the police can conduct criminal investigations on the issuers based on this latest judicial interpretation.

5. Does it trace back to the past?

Yes. Lawyer Liu Yang pointed out that judicial interpretation is the interpretation of the original law, not a newly created law, so judicial interpretation has retroactive effect and can be traced back to the past. The principle of "following the old and being lenient" does not apply to judicial interpretation. Simply put, for example, if you have done ICO before the judicial interpretation is issued, after the judicial interpretation is issued, you cannot claim that: this interpretation has just been issued, my behavior happened before, and I cannot be held criminally responsible for the crime of illegal fund-raising. Lawyer Sun Jun pointed out that generally speaking, it is not retroactive, but P2P also traced back many years, and there is a certain gray area.