CoinWorld News Report:
Let’s start with a question:
If Zhang San stole Li Si’s virtual currency and Li Si reported it to the police, what crime should Zhang San be charged with and how many years should he be sentenced to?
When individuals unlawfully acquire another person’s virtual currency, it often involves two types of crimes: illegal acquisition of computer information system data and theft. The specific charge varies in practice, with some being charged with illegal acquisition of computer information system data, some with theft, and some with both offenses, resulting in punishment for the more serious offense.
However, regardless of the specific charge, the amount involved in the case is an important factor that cannot be ignored. Whether it’s mainstream virtual currencies like Bitcoin and Ethereum or altcoins like platform coins and meme coins, they all share the common characteristic of large price fluctuations. The volatile price movements of these cryptocurrencies greatly affect the hearts of countless investors (which may be the excitement and fun of speculation).
However, in criminal cases, if the price of a cryptocurrency experiences significant fluctuations in a short period of time, how should the value involved be determined? Different standards for determination can lead to different amounts, which may directly impact the outcome of the case.
By Shao Shiwei, Lawyer
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Different ways of determining cryptocurrency prices directly impact the outcome of cases
Let’s look at a case (for privacy protection, the details have been slightly modified, and the mentioned cryptocurrencies and prices do not correspond to the actual case):
Zhang San and Li Si met in a dog-themed chat group. Zhang San had been involved in cryptocurrency trading for several years and was considered an experienced participant in the crypto market. Li Si, on the other hand, was a novice and often asked basic questions in the group. Zhang San was helpful and patient, always providing answers to Li Si’s questions. Over time, they became acquainted and became friends.
One day, Li Si asked Zhang San how to conduct a transaction. Zhang San asked him to send a screenshot, and Li Si carelessly included his ImToken wallet page in the screenshot. The next day, Li Si discovered that his PEPE coins in the wallet had disappeared without any explanation. He immediately reported the incident to the police, and Zhang San was subsequently arrested and charged with illegal acquisition of computer information system data, resulting in an eight-month prison sentence.
It turned out that when Li Si sent the screenshot to Zhang San, he inadvertently included the private key. Upon seeing this, Zhang San imported the private key into his own wallet and transferred the PEPE coins from Li Si’s wallet to his own. According to Article 285, Paragraph 2 of the Criminal Law, if the illegal gains exceed 5,000 yuan or cause economic losses of more than 10,000 yuan, the offender can be sentenced to less than three years in prison or detention for the crimes of illegal acquisition of computer information system data and illegal control of computer information systems. The court determined that the value of the PEPE coins transferred by Zhang San was 12,000 yuan, which roughly justified his eight-month sentence.
But is there no dispute in this case? Certainly not.
Firstly, Zhang San did not actually gain any illegal proceeds. The PEPE coins he transferred to his own wallet were traded on an exchange and resulted in a complete loss. There is no dispute regarding this transaction history.
Secondly, the court’s determination of the PEPE coin’s value at 12,000 yuan was based on the real-time price on the day of the transfer according to a specific exchange. But is this choice of time point scientifically sound?
The value of the cryptocurrency involved should be determined based on Li Si’s purchase price, the real-time market price at the time of Zhang San’s transfer, the price at which Zhang San converted the coins into USDT, or the price determined by judicial audit (although there was no audit in this case, and the determination of the amount involved was based solely on the testimony given by Zhang San to the public security organ).
Interestingly, the final determination of the real-time price of PEPE coins happened to be the highest point of the day and month. If we consider other time points as mentioned earlier, the price of PEPE coins would not have exceeded 10,000 yuan, the starting point for sentencing in this case.
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What are the different ways of determining cryptocurrency prices?
Although cryptocurrencies do not have the same legal status as fiat currencies, their property nature is recognized in China. Therefore, in criminal cases, the virtual currencies held by individuals are protected by law. However, determining the value of virtual currencies and their evaluation in practice is a complicated issue due to regulatory policies that prohibit pricing services for virtual currencies.
Currently, the following common methods are used in judicial practice to determine cryptocurrency prices:
1. Reports from pricing agencies and forensic appraisal institutions.
2. The consideration paid for purchasing the virtual currency.
3. The consideration received from converting the virtual currency into fiat currency.
4. References to prices on mainstream cryptocurrency exchanges.
5. Judicial discretion without calculating the value.
The second and third methods specify the time points for calculating the price, namely the “time of purchase” and the “time of conversion.” However, these methods are still not precise enough. The first and fourth methods are different approaches to determining the price, but the specific time points must still be considered.
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How are time points for calculating cryptocurrency prices determined in judicial practice?
1. Based on the illegal gains:
If the offender sells the stolen virtual currency and converts it into fiat currency, the calculation is straightforward. The illegal gains can be used as the basis for determining the sentence. For example, in a case with the case number (2023) Hu0104 Criminal Initial 856, Yang Mou used Yapi’s remote code execution vulnerability to gain control over a virtual currency website, infiltrated the internal network, implanted trojans, and obtained the victim’s virtual wallet address and private key. Yang Mou then used false instructions to transfer the victim’s virtual currency to another address and subsequently exchanged it for other virtual currencies, resulting in illegal gains of over 2.5 million yuan. The court sentenced Yang Mou to ten years and six months in prison for theft.
However, if the cost of acquiring the virtual currency by the victim is much higher than the price at which the offender stole and sold it due to significant price fluctuations, determining the amount based on illegal gains may not adequately protect the victim’s interests.
2. Based on the average price on the day of the illegal act:
Due to the significant volatility in cryptocurrency prices, determining the price based on the specific day of the offense can be argued from a defense perspective. It is reasonable to choose the specific time point of the criminal act or the average price on that day. For example, in the case (2020) Yue0304 Criminal Initial 2, the defendant Li Mou stole three Ether coins from the victim’s account on June 20, 2019, using the private key and payment password he had previously obtained. The victim submitted a screenshot of the market transaction record on HuobiGlobal, confirming that on June 20, 2019, the highest and lowest prices of Ether were 270.68 and 265.85 USD respectively, with an average price of 268.265 USD.
3. Unable to determine the price, judicial discretion:
In the aforementioned case (2020) Yue0304 Criminal Initial 2, Li Mou, as an employee of the company, not only stole Ether coins but also stole 4 million HaoDe coins developed by the company. However, since the HaoDe coins involved in the case were not publicly traded at the time of the theft, the court found it impossible to calculate their value. The court’s judgment only vaguely stated that this aspect should be considered at its discretion (Note: Li Mou had returned all the HaoDe coins to the company after the crime was discovered. Based on the judgment, the lawyer believes that the court did not consider this aspect).
4. Based on the price determined by a pricing appraisal institution:
In practice, another method of determining the price is to rely on the final determination made by a third-party appraisal institution. For example, in the case (2020) Chuan1425 Criminal Initial 1, the value of the virtual currency involved was roughly determined based on the price determined by the forensic appraisal institution of Pan Shi Software (Shanghai) Co., Ltd.
Compared to using the time of the offense, the purchase price of the victim, or the selling price of the offender as the basis for sentencing, I believe that using the date of appraisal for pricing loses objectivity and is unreasonable.
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Final Thoughts
In criminal cases, there is no unified standard for determining the value of virtual currencies. Even within the same case, the prosecutor’s office and the court may have different opinions and arguments.
For example, in the case (2020) Hu0106 Criminal Initial 551, the prosecutor’s office prosecuted Luo Mou for stealing Tether coins and claimed that the value of the stolen coins was equivalent to 12 million yuan based on the platform’s trading price at the time of the theft. However, the court stated that it does not recognize any virtual currency trading platform’s price data and therefore should not determine the value of the Tether coins involved in the case based on the historical prices from relevant websites. The court adopted the defense’s argument and ultimately determined the criminal amount based on the actual profit of 900,000 yuan made by Luo Mou.
Therefore, from the perspective of a criminal defense lawyer, the dispute over the valuation of virtual currencies provides opportunities for defense arguments in specific cases. As mentioned in the initial case, a different perspective could lead to an acquittal for the defendant.
