What are the crimes of illegal business operation and "aiding and abetting" involved in the Zhao Dong case?

Wu said the author | Huo Xiaolu

Editor of this issue | Colin Wu

Wu said blockchain learned that according to the Zhejiang Court website, Zhao Peng, Yu Xiaohan, Wang Yangsheng, You Ting, Shi Wei, Zhou Guangkai, Li Yabiao, Pan Yao, You Jin, Zhao Dong, Xiao Yong, Lin Fengjin and others are suspected of illegal business operations and assisting information network criminal activities. The trial will be held in the Xihu District People's Court of Hangzhou on May 12, 2021. Not surprisingly, the Zhao Dong mentioned in the middle is the well-known industry veteran in the currency circle and the king of OTC, Zhao Dong.

Huo Xiaolu, the author of Wu Says Blockchain, has popularized these two crimes in many articles, but they are only used for theoretical and empirical discussion here. We cannot know the details of the Zhao Dong case, so this discussion is not targeted at the Zhao Dong case.

Illegal business operation and underground banks

1. At the beginning of 2019, the Supreme People's Court and the Supreme People's Procuratorate issued the "Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Illegal Fund Payment and Settlement Business and Illegal Foreign Exchange Trading", which convicted and punished those engaged in illegal fund payment and settlement business and illegal foreign exchange trading as illegal business operations, with a maximum sentence of 15 years in prison.

When it comes to underground banks, illegal foreign exchange trading and illegal fund payment and settlement, if the circumstances are serious, constitute the crime of illegal business operation. One of the three major businesses of underground banks is foreign exchange trading. my country has always implemented foreign exchange control. Any organization or individual engaged in foreign exchange trading and settlement business in the country must obtain permission from the national foreign exchange management department and conduct it in designated places. Over-the-counter transactions are illegal.

Common over-the-counter routes:

1. The simplest and most brutal type - direct exchange

The most primitive and crude way to exchange RMB for foreign currency is to find a scalper and do the transaction directly.

After deducting the handling fee, one hand hands over RMB and the other hand hands over foreign currency. Cash settlement, no trace left.

2. Common advanced version - counter-trading exchange

Many money houses adopted the "counter-knocking" exchange method to deal with large-scale exchanges.

A wants to exchange foreign currency and finds B. A transfers RMB to B's designated domestic account in China, and B transfers the corresponding amount of foreign currency (minus the handling fee) to A's designated overseas account abroad.

In this process, the funds do not actually circulate across borders, but are paid and received in RMB or foreign currency in a single line at home and abroad. There is no intersection in space, which is a parallel delivery, realizing the cross-border inflow and outflow of funds in disguise. This exchange method is more concealed.

In the counter-trading mode, there are usually two account books, one for domestic and one for overseas, which need to be reconciled regularly. If the accounts are not balanced, the difference needs to be reconciled. Common methods include carrying cash in and out of the country, fabricating import and export transactions, and fabricating equity investments.

Underground banks are becoming "accomplices" in various illegal and criminal activities. Many criminal activities may involve large-scale fund transfers and foreign currency exchange, and underground banks have become an important link between upstream and downstream criminal activities, such as pornography, gambling, drugs, smuggling, and some economic crimes: fraud, tax evasion, fraudulent export tax rebates, fraudulent government rewards and other speculative arbitrage activities.

The crime of assisting information network criminal activities that became popular in the cryptocurrency circle

As we all know, many criminals use virtual currency transactions to launder money, and my country's policies do not encourage ordinary virtual currency transactions. As a result, many public security organs, especially in remote areas, naturally believe that if a bank card is frozen due to virtual currency transactions, it is impossible that they do not know that it is black money.

However, the public security organs always have to rely on evidence when handling cases. If it is to constitute the crime of "assisting information network criminal activities", the prerequisite is "knowingly that others use information networks to commit crimes". The problem lies in "knowingly". How to prove that it is knowingly is often difficult in practice. Therefore, the law stipulates a situation where if the relevant behavior is still carried out after being notified by the regulatory department, it can be presumed that it is knowingly.

Risk Warning

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.