Lawyer explains: If a cryptocurrency company is suspected of fraud, will technical personnel be implicated?

Wu Shuo Author | Guangdong Guangqiang Law Firm Lawyer Li Zemin Lawyer Han Wubin Lawyer

The author exclusively authorized WuShuoBlockchain to edit and publish

1. Technical personnel provide daily technical operation and maintenance and do not engage in fraud.

In futures fraud cases, what kind of behavior is considered as fabricating facts and concealing the truth? Is it the behavior of customer service staff to induce publicity and exaggerate investment ability and investment returns? No. Inducing and exaggerating publicity is not enough to make customers fall into a wrong understanding. Is it the behavior of the "lecturer" shouting counter-orders and reversely analyzing the market? No. Shouting counter-orders is just the personal experience of the "lecturer", and whether to follow the order still depends on the customer's own choice. The only behavior that can be evaluated as fabricating facts and concealing the truth is to manipulate the market and modify data.

For futures trading, customers place orders based on market analysis and forecasts, and hedge their orders with market counterparties to determine profits and losses. If the perpetrator controls the software transaction data, modifies the market data or the direction and amount of the customer's order, it will inevitably affect the mechanism of futures trading and cause direct losses to customers.

From the perspective of the technical staff's duties, the futures trading software they were responsible for technical operation and maintenance was provided by the company. They did not develop and design the trading software, nor did they modify the market data or manually add or delete software functions. They were assigned by the company to check whether the futures software was disconnected from the network, whether there were delays and bugs, and track the forced liquidation situation and other daily technical operation and maintenance services. The technical staff did not directly carry out fraudulent behavior that could determine the customer's loss.

Moreover, there is no causal relationship between the technicians’ daily technical operation and maintenance and the ultimate losses of the customers. Generally speaking, in order to make the losses of the victims of futures fraud be borne by the technicians, it is necessary to find out the causal relationship between the technicians’ behavior and the losses.

As for the technical personnel, unless they artificially modify and manipulate the trading software and set up obstacles, there is no causal relationship between the victim's financial loss and the technical personnel's behavior, and the technical personnel cannot be convicted of being accomplices in the crime of fraud.

2. The technical personnel did not have the subjective intention to commit fraud

In judicial practice, the identification of technicians involved in futures fraud as fraud is based on the fact that the technicians conspired with other personnel and provided technical assistance and support knowing that others were committing futures fraud. But do the technicians, as company employees, have conspiracy and do they know that others are committing futures fraud?

On the one hand, there is no fraudulent contact or communication between the technical staff and the organizers and planners of the platform, and there is no collusion. Technical staff are often employed and assigned to the risk control department or the technical department. When they join the company, the company has already clearly defined their responsibilities for daily technical operation and maintenance, and there is no division of labor for fraud; in actual work, their department is separated from other departments of the company. Due to the limitations of the company's functions, the personnel between departments do not know the business of each other, and it is difficult to form fraudulent contact and communication with other personnel of the company.

On the other hand, it is impossible for the technical staff to be aware of the fact that the company is committing fraud. Generally speaking, if the technical staff knows that there are irregular operations in the futures trading software, or knows in daily work that the trading software can be used to cheat or conduct false transactions, it can be presumed that they have the intention to defraud. However, the company's technical risk control personnel are neither the developers of the software nor the operators of the software platform, and they are not clear about the specific functions of the trading software.

Secondly, technical risk control personnel do not have the highest authority and cannot access the software backend. Usually, software used for futures trading has permission settings, and personnel at different levels can have different permissions. The ability to modify data and manipulate market conditions is limited to personnel with the highest authority. The authority of technical risk control personnel is only to see market data, customer orders, and the stop-profit and stop-loss lines set by customers, as well as forced liquidation situations.

3. Technical personnel do not have the purpose of illegal possession

Based on the technical staff's identity and the fact that he is engaged in equipment management and maintenance work with a high degree of replaceability, it can be concluded that he does not have the intent to defraud or the purpose of illegal possession, and it is difficult for him to realize that the entire platform is a fraud platform. If it is believed that he has a subjective understanding of fraud, it is beyond the cognitive scope of a technical staff.

The technicians were recruited into the company through formal channels, accepted the company's management, and received regular wages. In addition to the agreed wages, they did not receive dividends, shares, or unreasonable compensation from the proceeds of crime. The technical operation and maintenance they were engaged in was equipment management and maintenance work with a high degree of replaceability. Unless the company's management knew the business model and transaction mechanism, it was impossible for them to have known intent and illegal possession.

For example, the fraud case of Wu et al. (2019) Su0206 Criminal First Instance No. 27:

The court held that the seven accomplices were salesmen of the company and were recruited into the company through formal channels. The company had a good office environment, a clear management system and regular salary payments. According to the confessions of the four principal offenders, only the company's management knew about the "JSGJ" software channel and the flow of customer funds. The employees were not aware of the company's operating model and profits, including customer losses. Their main responsibility was to develop as many customers as possible through telephone and the Internet. The company also had an incentive mechanism, and salesmen received additional bonuses when customers made profits. Therefore, the seven accomplices did not have the subjective intention of illegal possession.

Although the salesperson did exaggerate the investment capabilities and investment returns when selling the company's futures business and providing investment advice over the phone, customers should be aware that there are risks in investment. Therefore, the exaggerated publicity is not enough to mislead customers and does not constitute the act of fabricating facts in the crime of fraud. Therefore, the seven accomplices in this case do not constitute the crime of fraud.

IV. Technical personnel should be convicted of the crime of assisting information network criminal activities and recognized by judicial cases

When the risk control technicians in a futures fraud have no intention of fraudulent contact or communication with the organizers and planners of the platform and it is impossible for them to be aware that the company is committing fraud, their behavior of providing technical operation and maintenance can only be charged with the crime of assisting information network criminal activities.

That is, when the criminal intention cannot be ascertained or the perpetrator has only indirect and general intention, the crime of aiding information network criminal activities should be convicted and sentenced. (Author: Song Peng, Yang Jinling, "Prosecution Daily", "Two-card Crime: Distinguishing between Aid to Fraud and Aid to Information Network Criminal Activities")

In judicial practice, there are also many cases that recognize this.

For example, the case of Zhang et al.'s illegal business operation [(2020) Yue 20 Criminal Final No. 467]

Gao, technical director of xx company, performed relevant technical maintenance for the platform, such as modifying customer payment channels. After leaving the company, Dai, a technical staff member of xx company, was responsible for providing technical maintenance for the platform, such as modifying customer payment channels, modifying market opening hours, and solving market stagnation, according to the requirements of defendant Zhang and others. Later, the court held that defendant Gao had committed the crime of assisting information network criminal activities.

Another example is the case of fraud by Wan et al. [(2020) Wan 06 Criminal Final No. 13]

In order to make illegal profits, Wan contacted Zeng through others and asked Zeng to build a "micro-transaction" platform. Zeng provided it to Wan and provided technical assistance such as platform maintenance. Later, the court held that Zeng had committed the crime of assisting information network criminal activities.

To sum up, this lawyer believes that although the risk control technicians in futures fraud cases objectively provided technical support, they only provided daily technical operations and maintenance, and did not directly implement fraudulent behavior that could determine the client's losses. There is no causal relationship between their behavior and the client's ultimate loss.

At the same time, since risk control technicians are employed by the company, receive fixed salaries, and engage in management and maintenance work that is highly replaceable, they do not have the highest authority, and it is difficult to determine that they have the intent to defraud and the purpose of illegal possession. Therefore, they cannot be convicted of fraud.

However, although the risk control technicians did not directly implement the fraudulent activities of modifying market conditions and manipulating data, they objectively still provided technical assistance. Although they did not have a definite and specific intention to commit fraud subjectively, they had an abstract understanding of criminal activities.

Based on this, if it is difficult to make a not guilty defense, the defense lawyer can strive to make a misdemeanor defense to help convict the crime of information network criminal activities and obtain a lower sentence for the risk control technicians.

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According to the "Risk Warning on Preventing Illegal Fund Raising in the Name of "Virtual Currency" and "Blockchain"" issued by the China Banking and Insurance Regulatory Commission and other five departments, readers are requested to abide by the laws and regulations of their region. The content of this article does not endorse the promotion of any business or investment activities. Investors are requested to raise their awareness of risk prevention. Wu said that the content of the blockchain is not allowed to be reproduced or copied without permission, and violators will be held accountable.