Introduction

It is very common in practice to have bank cards frozen due to trading virtual currencies. Friends who often speculate on coins will also understand relevant legal knowledge on their own, knowing that our country's relevant policies do not prohibit the trading of virtual currencies. However, many consultees have told me that when they communicate with the card-freezing authorities to unfreeze their cards, they are not only refused, but also sometimes scolded. Clearly, they are also victims, and it is not illegal to trade virtual currencies, so why are they being treated as "bad people" by the public security authorities?

So, why is it so difficult to unfreeze? Lawyer Shao often says "What is 'visible' in the eyes of U merchants is only the tip of the iceberg". So let's start with a case to see the part above the iceberg_ (real case, slightly modified for industry and amount to protect privacy, the rest is real)_.

01. A "Frozen Card Dilemma" Caused by a Virtual Currency Transaction

Lao Wang is in the fur business, and trading coins is just a hobby. One day, as usual, he posted a U for sale on the exchange, and someone contacted him to buy it. However, the buyer seemed to be a novice and not very skilled, so the two added each other on WeChat. The buyer's name is Xiao Yu. Lao Wang patiently guided Xiao Yu step by step until the transaction was completed. After that, Xiao Yu became proficient in the operation, and the two also got along well. Xiao Yu often bought U from Lao Wang.

But Lao Wang was also curious why the other party, who seemed to be a novice in the coin circle, had such a large demand for U. He asked her what she was going to do with so much U and kindly reminded her not to be deceived. But Xiao Yu said that she and a few friends were investing together. Although she might not understand it very well, her friends knew more than her, so Lao Wang didn't need to worry. She also said that the money she gave to Lao Wang each time was her own salary income and showed her salary flow to Lao Wang.

Lao Wang confirmed that the other party's source of funds was legal, and indeed it was the other party who transferred the money to him each time, so he felt relieved. But he also kept reminding the other party to buy less and to invest a little less first to see if the project could be profitable, and not to invest a large amount of money all at once into one project.

The two traded about a dozen orders over three months, and Lao Wang received 600,000 yuan from selling U. One day, Lao Wang found that his bank card had been frozen. Through the bank, Lao Wang contacted the freezing authority and learned that it was actually Xiao Yu who reported the case. Lao Wang contacted Xiao Yu, but she never replied to any messages.

The police told Lao Wang that the victim, Xiao Yu, reported that she had been defrauded. The reason was that Xiao Yu met someone online who, after becoming familiar with Xiao Yu, said there was a virtual currency investment project and even showed Xiao Yu the returns. Xiao Yu believed it and said she wanted to try it too. The other party asked Xiao Yu to buy U at the exchange and transfer it to him, and he would help Xiao Yu with the investment. Xiao Yu downloaded a certain exchange app herself and contacted Lao Wang. Xiao Yu gave a small amount of the purchased U to the other party first, and there were indeed good returns at the beginning, so Xiao Yu increased her investment. Unexpectedly, three months later, the other party blocked Xiao Yu.

The police informed Lao Wang that the victim, Xiao Yu, claimed that you and the person who defrauded her into investing in a virtual currency project are accomplices and defrauded her of 600,000 yuan. Is this true?

Lao Wang took out his phone and submitted all the chat records between him and Xiao Yu to the police. The handling police also took the case very seriously, reviewed all the communication records between the two parties, and also conducted multiple rounds of questioning with Xiao Yu. Xiao Yu admitted that the person who defrauded her online asked her to find a U merchant at the exchange herself, so she contacted Lao Wang herself.

Therefore, the handling police can confirm that Lao Wang is innocent. Moreover, the relevant chat records show that Lao Wang repeatedly reminded Xiao Yu to buy less and be cautious of being deceived.

Lao Wang thought that since he was innocent, there should be no problem unfreezing the card, right? Unexpectedly, the handling authority not only did not unfreeze his card, but also froze all the bank cards under his name!? Now, not only his daily life was affected, but Lao Wang's fur business also suffered a great impact. The money paid by customers into Lao Wang's company account was also affected because of transactions with this card.

Since then, the case has been in a deadlock—Lao Wang is only willing to compensate the victim with a maximum of 20,000 yuan, while the victim demands that Lao Wang fully compensate her with 600,000 yuan. The police neither unfreeze Lao Wang's card nor deduct the funds in the card to compensate the victim. Currently, all bank cards under Lao Wang's name have been frozen for nearly a year.

02. Everyone Has Their Own Standpoint

Why did it end up in such a frustrating deadlock? Because everyone has their own perspective.

1. Victim's Perspective

The victim was deceived, and due to a lack of relevant evidence and clues, it is extremely difficult in some places to even file a case for rights protection. After finally filing a case, due to many real-life reasons, the police really cannot catch the real "bad person," and even if they do, it is very difficult to recover the victim's funds. As for the reasons, you will understand after watching these two videos.

2. Perspective of the U seller

It is not illegal for individuals to trade virtual currencies, and my U also comes from legal sources. It's not stolen or obtained by deception, and the RMB I received is also at the normal USDT market price. Why did a victim suddenly appear out of nowhere claiming to have been defrauded, and then freeze my card, and even demand that I fully compensate her for all her losses?

She was defrauded, so what does that have to do with me? Why doesn't the police go after the real fraudster?

3. Police Perspective

By tracing the fund transaction chain, we can exclude Zhang San from suspicion. But the upstream fraudster cannot be caught, and the victim keeps demanding that the police arrest someone and recover the losses, and even keeps complaining and petitioning, saying that we are not taking action. We tried to mediate and explain to the victim that Zhang San is not the person who defrauded her, and that he is willing to compensate her, but the victim actually said that we and Zhang San are in cahoots! The victim's emotions are currently quite agitated, and the two sides cannot agree on a compensation amount. If we unfreeze Zhang San's card now, won't the victim cause even more trouble? Our work and handling cases are also subject to assessment… But indeed, Zhang San is not suspected of committing a crime, and we also do not have the right to directly deduct money from Zhang San's account. So, let's just freeze the accounts, maybe this way Zhang San will take the initiative to reconcile with the victim?

03. Considerations for Resolving the Deadlock

Lawyer Shao has encountered many cases where people's bank cards were frozen due to trading virtual currencies. This situation is not uncommon. But is it reasonable just because it exists? Of course not.

1. About "Trading Virtual Currencies Not Being Legally Protected"

When many cardholders communicate with the handling officers, saying that their trading of U is not illegal, many handling officers respond: Yes, we also know that trading virtual currencies is not illegal, but it is also not legally protected.

However, Lawyer Shao believes that the above view is a misinterpretation of "trading virtual currencies not being legally protected." Not being legally protected should mean that, for example, if you entrust someone to invest your virtual currency and it results in a loss, or if you lend virtual currency to someone and they refuse to return it, then you should bear the risk yourself. There are indeed court judgments that support this view. For details, please refer to my previous article "Court's View: Transferring virtual currency to the other party constitutes an illegal debt! If you lend it, don't expect to get it back!—Lawyer's advice: How can you get the money back?".

But for the Frozen Card, and Even the Recipient (Seller) Concealing the Receipt of Illegally Obtained Funds Due to Trading Virtual Currencies

They not only suffered losses of virtual currency, but also have to refund the so-called victim's losses. Their losses have exceeded the scope of "bearing the risk." This is obviously unfair. The victim is a victim, and the seller is also a victim.

2. About Freezing All Bank Cards Under the Name

As mentioned in the previous section, although the existing evidence has ruled out Zhang San's involvement, in response to pressure from the victim, the handling officers actually froze all of Zhang San's bank cards, hoping to force Zhang San to reconcile with the victim. This is clearly unreasonable.

Some handling units, although their attitude is: no compensation for the victim's losses, no unfreezing, are willing to provide a situation explanation for the cardholder, rule out the cardholder's involvement, so that the cardholder can apply for unfreezing from the bank. Although this approach has brought some convenience to the parties involved, allowing their other bank cards to be used normally, for the cardholder, their core demand is inevitably not to refund the money. Of course, in many cases we have handled, the public security authorities have ultimately unfrozen the cardholder without any responsibility, but this is relatively rare.

According to legal provisions, in cases of telecommunications fraud, the public security authorities do have the right to deduct funds and return them to the victim, but there is a prerequisite—the receiving account must be controlled by the criminal. Obviously, a normal U seller does not have a conspiracy with the criminal, and their receiving account is not controlled by the criminal's bank account. Therefore, the public security authorities have no right to deduct funds from the recipient's account in such transactions. This is also the reason why many cardholders whose cards have been frozen have not had their account balances deducted, despite years of deadlock in communication with the public security authorities.

"Regulations on the Return of Frozen Funds in New Types of Illegal Crimes in Telecommunications Networks" Article 2: The cases of new types of illegal crimes in telecommunications networks referred to in these regulations are those in which criminals use telecommunications, the internet, and other technologies to deceive (steal) victims' funds into accounts controlled by them through methods such as sending text messages, making phone calls, and implanting trojans, and commit illegal criminal acts.

Article 4: The public security authorities are responsible for clarifying the flow of funds to the victim, promptly notifying the victim, and making a decision to return the funds, and implementing the return.

3. About the Determination of the Recipient's Good Faith Acquisition

Lawyer Shao believes that for the recipient (i.e., the USDT seller), the recipient cannot control whether the payment is made by the buyer in person, nor can they predict whether the funds instructed by the buyer to be paid by a third party are illegal. Since virtual currency is considered a virtual commodity and transactions between individuals are not prohibited, as long as the USDT seller can provide evidence to prove that both parties engaged in normal USDT trading (such as communication screenshots in Binance, OKEx exchanges, communication records between the parties, and legitimate sources of U held), then according to legal provisions, the seller's sale of virtual currency constitutes a good faith acquisition and should not be recovered or refunded to the relevant victim.

"Regulations on the Return of Frozen Funds in New Types of Illegal Crimes in Telecommunications Networks" Article 2: The cases of new types of illegal crimes in telecommunications networks referred to in these regulations are those in which criminals use telecommunications, the internet, and other technologies to deceive (steal) victims' funds into accounts controlled by them through methods such as sending text messages, making phone calls, and implanting trojans, and commit illegal criminal acts.

Article 4: The public security authorities are responsible for clarifying the flow of funds to the victim, promptly notifying the victim, and making a decision to return the funds, and implementing the return.

According to Article 10 of the "Interpretation of Several Issues Concerning the Specific Application of Law in Handling Criminal Cases of Fraud" by the Supreme People's Court and the Supreme People's Procuratorate_ If the perpetrator has used the fraudulently obtained property to repay debts or transfer it to others, and meets one of the following circumstances, it shall be recovered in accordance with the law:

_ (1) The other party knowingly received the fraudulently obtained property;_

_ (2) The other party obtained the fraudulently obtained property without compensation;_

_ (3) The other party obtained the fraudulently obtained property at a price significantly below the market;_

_ (4) The other party obtained the fraudulently obtained property from illegal debts or illegal criminal activities._

If the property is obtained in good faith by others, it shall not be recovered.

In a recent virtual currency trading frozen card case handled by Lawyer Shao, when communicating with the handling personnel, their understanding of "trading virtual currencies between individuals in China is not illegal" is: individual trading refers to transactions only through wallets. If it is through an exchange, then it is not C to C, so trading virtual currencies on exchanges is illegal. As long as they receive funds related to fraud, they must refund the full amount to the victim.—Such views also directly explain why virtual currency unfreezing is often hindered. The differences in understanding of virtual currency trading by handling units in various regions are too great.

4. Conclusion

Due to the varying degrees of understanding of virtual currencies and related transactions by handling units in different regions, not only is it difficult to achieve "same handling for the same case" in unfreezing bank cards, but in some cases, in criminal cases handled by Lawyer Shao, the parties involved have been charged with concealing and abetting crimes, with a similarity rate of up to 95% to cases that resulted in frozen cards. As a criminal defense lawyer with many years of practice, I occasionally find such cases puzzling.

So, returning to the initial question of this article: Who should be responsible for receiving illegally obtained funds from selling U? Tell me your opinion in the comments below.

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