When investing in cryptocurrency, why is it always you who gets hurt?

Recently, the Sajie team has received many consultations on disputes caused by cryptocurrency investment. Since the subject of the lawsuit is virtual currency, whether filing a civil lawsuit or a criminal report, it will encounter special legal issues that are different from traditional rights protection. In order to avoid the old friends of financial technology from stepping on the thunder, we will sort out the reasons for disputes in cryptocurrency investment in this article, and introduce some matters that need to be paid attention to during the cryptocurrency investment process.

The causes of cryptocurrency investment risks

Why is it easy for cryptocurrency investment to cause disputes? The Sajie team believes that it can be analyzed from the following two dimensions :

First, cryptocurrency investment lacks a comprehensive regulatory environment . Unlike relatively mature capital market investment types such as the secondary market, bonds, and even private equity funds, except for the definition of mainstream virtual currencies such as Bitcoin by the Silver and Development [2013] No. 289 document and the 2017 No. 94 document, which gave institutions anti-money laundering obligations , the documents flatly denied the possibility of virtual currency financing and legal currency attributes, resulting in too many gray areas in cryptocurrency investment and too few areas covered by regulatory provisions.

From the specific performance, on the one hand, it is difficult for investors to judge whether the trustee's operation behavior complies with domestic laws and regulations, whether it will be subject to administrative penalties, or even criminal liability. The lack of expected instability makes investors' risk resistance insufficient; on the other hand, the negative legal evaluation and the absence of supervision have led to a high moral risk for the trustee, and there are many cases of misappropriation of tokens.

Second, judicial decisions vary in standards . Judging from the judgment trends in recent years, there are civil decisions that have determined that the absorption of tokens violates mandatory regulations and denies the validity of investment contracts, as well as civil decisions that recognize mainstream virtual currencies as property interests and conduct occasional transactions, and even criminal decisions that identify individuals' occasional OTC transactions as illegal business operations. In this environment, investors cannot be sure whether their investment behavior can be protected by law, and investment risks are naturally difficult to control.

Litigation Dilemma in Practice

When there are obstacles to the return of virtual currency, investors usually hope to obtain compensation or reimbursement through legal channels such as civil lawsuits or criminal reports. However, unlike traditional investment projects, cryptocurrency investment has inherent difficulties in protecting rights. The Sajie team will list them for you here:

First, there are obstacles in seeking professional legal help . Many investors with legal needs need to popularize common terms and related knowledge in the cryptocurrency circle from legal professionals before obtaining legal advice, which greatly reduces the efficiency of consultation. If the popularized knowledge is not clear enough, it may also cause misunderstandings and biased answers from the consulting party.

Secondly, it is difficult to collect and present evidence in the case . Since the investment target is virtual currency, its "transfer" is carried out through the wallet address. Although such records are recorded on the Internet, the query channel is through major currency websites. When investors present transaction records to judicial authorities, the evidentiary effect of website query results is insufficient compared to bank transfer records, and may not meet the proof standards of various lawsuits. Secondly, the real-name information of the wallet address cannot be directly reflected in the query results. How to prove that the recipient of the currency is the counterparty is also one of the practical difficulties.

Finally, it is difficult to promote the work of judicial organs . Due to the high degree of professionalism in the transaction of virtual currency and the small circle, there is a lack of precedents of specific types. Specifically, there are only a handful of police officers with relevant case handling experience in a particular judicial organ. Even in first-tier cities, the promotion of common litigation procedures will encounter difficulties. Taking the preservation during litigation as an example, there are not a few judges who refuse to issue preservation orders on the grounds of operational difficulties. This requires professional litigation agents to popularize professional knowledge and indicate the legal basis and operation methods while handling cases in a routine manner.

Advice for cryptocurrency investors

Based on recent case handling experience, the Sister Sa team provides the following suggestions for cryptocurrency investors:

1. The investment target should be property interests protected by Chinese civil law, i.e. mainstream virtual currencies;

2. Indicate the wallet addresses, WeChat IDs, mobile phone numbers and other common contact information of each party in the signed investment agreement, and agree that the jurisdiction of the dispute should be in the courts of first-tier cities as much as possible;

3. Keep all communication transcripts arising from investment activities, including but not limited to chat records, call records, etc.;

4. Verify the operating conditions and repayment ability of the token trustee, and do not trust so-called acquaintances or small and micro projects;

5. Seek help from legal professionals in terms of pre-event risk assessment and post-event rights remedies ;

6. Deal with disputes that have occurred rationally and leave room for reconciliation while trying to seek legal remedies.

Final Thoughts

Due to the small radiation range, most cryptocurrency investment projects are not enough to form the prototype of mass incidents. Therefore, investors usually do not get the protection of local policies in the process of seeking various legal remedies. In other words, how to properly use legal technology has become the key to resolving disputes. In order to safeguard legitimate rights and interests, the Sister Sa team hopes that cryptocurrency investors can do the above matters to pave the way for various lawsuits that may occur in the future.

The above is today’s sharing, thank you readers!