Written by: Liu Honglin, Mankun Law Firm
A couple of days ago, lawyer Liu Honglin from Mankun Law Firm received a consultation from a client online. This client previously worked for a project team preparing to issue a cryptocurrency overseas, and recently the project is planning to go on an exchange (I didn’t ask which specific project). However, considering the recent market conditions that feel a bit like a bear market, this friend is very worried that after the project goes on the exchange, the token price might not meet expectations, and what should be done if users in the community come to complain?
More importantly, this friend has been living in China for a long time and does not plan to leave the embrace of the motherland. If someone reports to the police in China to protect their rights, will they, as a remote worker, bear legal responsibility?
Such worries and concerns are actually quite common in the cryptocurrency circle. Every time lawyer Honglin participates in offline events, friends come to discuss similar issues, many of whom are young people just out of university. After all, it’s not easy to find a job now, and many blockchain projects offer decent salaries, with more flexible working hours and locations due to distributed work.
In this article, lawyer Honglin will discuss this topic with everyone. Of course, the related questions and answers have been desensitized and are no longer limited to this one client consultation.
Legal Risk Analysis of the Project Itself: Source of Risk
Before discussing legal risks, we must conduct a comprehensive legal analysis of the project itself, as legal risks stem from the business, which is the source of all wealth and risk.
First, we need to confirm where the project is registered. If the project team’s company is registered in a country or region that has a relatively lenient attitude towards virtual currencies, then the operation of the project may not constitute a direct legal risk. However, if the project is registered in a country with strict regulations on virtual currencies, then the legal risks will significantly increase, especially concerning the trading and issuance of virtual currencies. This is why blockchain project teams with a bit of risk awareness deliberately avoid the United States for both company registration and fundraising.
Whether the project’s market promotion involves users in mainland China is the core issue for legal risk assessment. If the project’s marketing targets users in mainland China or even allows Chinese users to participate in investment or trading, it may violate relevant policies and laws in China. Currently, China prohibits ICOs (Initial Coin Offerings) and virtual currency trading, so any token sales or marketing activities aimed at Chinese users could be deemed illegal.
Additionally, whether the business model of the virtual currency project involves illegal fundraising, pyramid schemes, or other illegal activities is also a key point in analyzing legal risks. If the project’s sales model includes characteristics that suggest pyramid schemes, such as recruiting others or offering rebates, or if its token sales are essentially illegal fundraising, then the project team and related participants may face criminal risks. If the project itself does not have legal issues, then the legal risks for the staff involved in the project will naturally be much lower.
Legal Risk Analysis for Remote Workers: Greater Responsibility, Greater Risk
Returning to the micro level, for partners providing specific work and business services to overseas project teams, we can analyze the legal risks from two aspects.
First, providing remote services to overseas companies or project teams is not inherently problematic. Whether it’s a Web3 project or another traditional internet project, as long as the other party’s business is legal, remote support from operational personnel will not constitute direct legal risks. Of course, this premise assumes that the project complies with the laws and regulations of mainland China. A typical example is if the other party is an overseas casino project; then, providing services for it, whether technical support or marketing services, is illegal in mainland China. Therefore, as a friend applying for an overseas project, you must first confirm that the project’s business is legal and compliant to avoid supporting a project that may have legal risks.
Secondly, if the project itself has legal or compliance risks, the legal risks for staff mainly depend on their level of involvement in the project. A quote from the movie "Spider-Man" states, “With great power comes great responsibility.” This applies to any industry or company. Generally speaking, core management or executives involved in the project will bear greater legal responsibility. Especially if you, as an executive, participate in key decisions of the project, such as financial operations or token issuance, your legal risks will significantly increase if the project is deemed illegal. Conversely, if you are just an ordinary operational staff member in the middle or back office, responsible for daily operational strategies and have not participated in core decision-making and financial management, your legal risks are relatively low. The law typically considers your role and actual level of involvement when determining responsibility. Therefore, clients need to clarify their specific responsibilities in the project and try to avoid getting involved in core sensitive decisions, especially those related to token issuance and financial management.
Legal Handling of Community Objections and Reporting for Rights Protection: Not Easy, But Preventive Measures Are Necessary
Many project staff responsible for Chinese communities are very worried about their real-name identities and appearances facing users in mainland China. If one day community users express dissatisfaction and even report to the police in China to protect their rights, will their personal safety be affected? We need to clarify that trading virtual currencies in China is itself a gray area. The policy clearly prohibits ICOs and token trading, but for blockchain technology development companies and legitimate companies that comply with the regulatory policies of their respective countries and regions, China does not outright deny them. To put it more practically: whether a project is legitimate or not is something the police cannot definitively grasp. Therefore, when you say you participated in a blockchain project and suffered losses or were defrauded, the police's first reaction is: “Look, I’m issuing anti-fraud propaganda every day, and you still don’t pay attention. The state doesn’t allow virtual currency activities; if you lose, don’t look for the government.” Thus, if community users report to the police, whether the police will file a case is uncertain. Unless the project involves serious illegal activities such as illegal fundraising or fraud, the likelihood of filing a case is low.
However, this does not mean that users will not take other pressure tactics. In addition to reporting to the police, community users may complain through the industry and commerce administration, market supervision bureau, financial regulatory departments, and other agencies. Such complaints often focus on whether the project has violated market regulation and financial laws, such as false advertising or illegal fundraising. Especially if the project has participants from mainland China, users may attempt to protect their rights using domestic legal frameworks. Although such complaints may not directly lead to criminal cases, they can cause regulatory troubles for the project and even affect its operations. For project teams, intervention by industry and commerce and financial regulators may trigger further legal risks and administrative penalties.
Additionally, lawyer Honglin would like to remind everyone that community users, in the process of protecting their rights or applying pressure, may also violate the law. For example, some users may spread personal information of project staff on public platforms to exert pressure, which involves infringing on privacy rights. Or they may engage in malicious attacks on social media, defaming the project team and staff, which could also constitute defamation. These actions may seem like they are for protecting rights, but they are essentially illegal. If project staff discover such situations, they can take legal action to protect their legitimate rights and interests and take timely measures to address false statements or privacy infringements.
Therefore, project teams need to prepare for potential community objections and rights protection actions. On one hand, they should assess the compliance of the project itself to ensure that operational behaviors do not cross legal red lines; on the other hand, they should always pay attention to community users' reactions, especially when users take extreme measures, and use legal means to protect themselves to prevent unnecessary damage caused by others' illegal actions.
Three Suggestions for Self-Protection in Remote Work: Clarify Boundaries, Preserve Evidence, Avoid Sensitive Operations
Understand and Assess the Project’s Compliance
First, as a friend about to join the company, you need to conduct a comprehensive risk assessment of the project you are participating in. This includes understanding whether the project team’s registration is in a cryptocurrency-friendly jurisdiction, especially regarding the legal regulations on virtual currencies and token issuance. Secondly, clarify the target audience for the project’s marketing, especially whether it is aimed at users in mainland China. If the project involves Chinese users, it is advisable to request the project team to make appropriate adjustments to their marketing activities to avoid crossing the legal red lines regarding virtual currency trading in mainland China. Additionally, clarify the project’s business model and carefully examine whether there are signs of illegal fundraising, pyramid schemes, or other illegal activities. If there are doubts about the project’s compliance, it is advisable to suggest that the project team hire a professional legal advisor to assess the project’s compliance.
Ensure Clear Responsibilities and Preserve Evidence
As project staff, you should clarify your boundaries of responsibility and try to avoid participating in sensitive tasks such as financial management or token distribution. You can confirm your specific responsibilities with the project team in writing (such as through emails or work task documents) to ensure that each work item has been clearly confirmed, avoiding being implicated in disputes later due to unclear responsibilities. If the project team asks you to participate in financial or token issuance-related work, it is advisable to clearly refuse and preserve communication records to prove that you did not participate in sensitive decision-making. Additionally, it is recommended to regularly back up work materials related to the project, especially documents and communication records involving operational strategies and marketing, to ensure that you have evidence to prove your scope of responsibilities and operational norms in case of disputes.
Seek Legal Help Promptly in Case of Disputes
If community users express objections after the project goes live, or if there are reports to the police for rights protection, it is advisable to communicate with a lawyer immediately to assess your legal responsibilities. You can prepare relevant materials in advance, including compliance documents for the project, your work records, communication logs, etc., so that the lawyer can quickly understand the situation and provide effective legal advice. You can also discuss with the lawyer whether preventive measures need to be taken, such as whether you should withdraw from the project in advance if the project’s operations have compliance risks, or proactively clarify your role before disputes arise to ensure that your level of involvement and scope of responsibility are clearly defined by law. Furthermore, if community users take extreme measures, such as maliciously releasing personal privacy or engaging in defamation, it is advisable to take swift action under the lawyer’s guidance, including issuing statements to clarify the facts or taking legal action to hold the infringers accountable.
Summary from Mankun Law Firm
Whether you are a newcomer in operations or a veteran in the cryptocurrency circle, participating in virtual currency projects, especially those targeting the domestic market, requires you to maintain a high level of vigilance regarding compliance and legal risks. Working remotely for overseas projects is fine, but the premise is that the project itself is legal and compliant, and you must clarify your boundaries of responsibility, avoid sensitive operations, and keep good work records. When facing community objections or potential legal disputes, seek professional legal help promptly, which can not only protect your rights but also help you establish a foothold in this complex market. After all, in the world of surfing Web3, opportunities and risks coexist, and avoiding risks and ensuring personal safety is the key.
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