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China’s Supreme Court Targets Illegal Fundraising Via Crypto Transactions
The ruling paves the way for violators to be criminally prosecuted, with a punishment of up to 10 years in prison and fines of up to $79,000.
Updated May 11, 2023, 6:30 p.m. Published Feb 24, 2022, 4:16 p.m.
China's Supreme Court ruled Thursday that some virtual asset transactions can constitute "illegal fundraising," paving the way for judicial prosecution of the crypto industry.
- While the People's Bank of China and a host of other top-level agencies had declared that crypto transactions are illegal fundraising back in September 2021, the court ruling formally designates them as a crime and determines related punishments.
- Thursday's ruling said that suspects will be prosecuted under Article 176 of China's criminal law, which stipulates prison sentences between three and 10 years and fines between RMB 50,000 (US$7,900) and RMB 500,000 ($79,000) for crimes involving large sums of money. Less serious crimes will be prosecuted with under three years of prison and RMB 20,000 ($3,160) to RMB 200,000 ($31,600) in fines, according to the criminal law.
- The amendment comes into effect on March 1.
- The law targets illegal fundraising through crypto transactions when four conditions are met, explained Shi Lei, China-based attorney, arbitrator and lecturer. These are public fundraising, unclear fundraising goals, promised returns on capital and interest and activities that violate laws and regulations, he said.
- "It's a speculation crackdown," Kendra Schaefer, who heads the tech practice at Beijing-based consultancy Trivium, told CoinDesk. Some crypto companies promise high returns to investors, but these encourage highly speculative investments, which Chinese regulators are trying to eliminate.
- Chinese provincial authorities continue to crack down on the industry. The eastern province of Zhejiang announced increased electricity tariffs on Wednesday for crypto mining, joining Hainan and Inner Mongolia.
Read more: Police in China’s Zunyi City Bust a $124M Money Laundering Scam
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CORRECTION (Feb. 28, 16:41 UTC): Clarifies headline and first graf that only some transactions are illegal under the new ruling, and adds comment from analysts in fourth and fifth bullets.
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Canadian Province Wins Forfeiture of $1M QuadrigaCX Co-Founder's Cash, Gold via Default Judgment
The ruling transfers cash, gold bars, watches, and jewelry seized from a CIBC safety deposit box and bank account into government hands after Patryn did not defend the case.
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- The Supreme Court of British Columbia has forfeited $1 million in cash and gold tied to QuadrigaCX's co-founder, Michael Patryn, to the government.
- Patryn did not contest the forfeiture, which involved 45 gold bars, luxury watches, and over $250,000 in cash seized under an Unexplained Wealth Order.
- The forfeiture may lead to a process determining if any assets can be directed to QuadrigaCX's creditors, who received 13 cents on the dollar in the bankruptcy settlement.
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