I entrusted someone to speculate on virtual currency to make a profit, but the investment funds could not be recovered due to the freezing of the trading platform. Who should bear the losses? The client appealed to the trustee to repay the principal and interest. How would the judge rule?
Recently, the Intermediate People's Court of Xiangyang City, Hubei Province, heard a dispute case caused by speculation in virtual currency, and ultimately ruled that the client Wang Moubo should bear the economic losses himself.
In June 2022, Wang Moubo was introduced by his friend Hu Mou to Huang Moubin, who was good at speculating USDT virtual currency (Tether, a virtual currency that pegs cryptocurrency to the US dollar) through an electronic platform.
After learning about the USDT virtual currency speculation, on June 12, 2022, he paid 27,035 yuan to Huang Moubin through Huang Moubin's POS machine to invest in the speculation of USDT virtual currency, and registered four virtual currency trading accounts on the electronic platform through Huang Moubin.
On June 18, June 25, July 6, and July 10, 2022, after Huang Moubin paid the earnings of Wang Moubo's four virtual currency accounts to Hu Mou, Hu Mou paid Wang Moubo 614.25 yuan, 596.30 yuan, 1221 yuan, and 363 yuan respectively through WeChat, totaling 2794.55 yuan.
On July 18, 2022, the electronic platform was frozen due to huge trading volume and suspected criminal cases. Investors' accounts could no longer trade, and the funds invested by Wang Moubo were completely wasted.
Wang Moubo asked Huang Moubin for the investment money but to no avail, so he took the case to the court, requesting that Huang Moubin and Hu Mou jointly repay his financial management funds of 27,035 yuan and interest.
During the trial, Huang Moubin argued that there was no factual or legal agency relationship between him and Wang Moubo.
As a person with full civil capacity, Wang Moubo should be aware of the risks and investment situations of investing in virtual currency. The foreign exchange invested by the plaintiff, namely Tether, is not a valid circulating currency, and the losses caused by the investment should be borne by him himself.
Hu argued that the more than 20,000 yuan invested by Wang Moubo was paid directly using Huang Moubin's POS machine, and he should not be responsible for returning the investment and interest.
After hearing the case, the first-instance court held that after Wang Moubo learned about the speculation of USDT virtual currency through electronic platforms, he paid the speculation funds to Huang Moubin and speculated on USDT virtual currency through an account registered by Huang Moubin. He could check the account himself, understand the account income, and obtain income through Huang Moubin and Hu Mou. The evidence he presented was insufficient to prove that he entrusted Huang Moubin and Hu Mou to speculate on USDT virtual currency with the investment funds. Therefore, the court did not support Wang Moubo’s claim that he had a financial management contract relationship with Huang Moubin and Hu Mou.
Virtual currency does not have the same legal status as legal currency and is not legally compensable. Therefore, Wang Moubo should bear the losses caused by investing in USDT virtual currency through Huang Moubin himself, and the court therefore ruled to dismiss Wang Moubo's lawsuit.
After the verdict was announced, Wang Moubo was dissatisfied and appealed to the Xiangyang Intermediate People's Court.
After the second trial, the Xiangyang Intermediate People's Court held that the evidence in the case proved that Wang Moubo paid money to Huang Moubin, and Huang Moubin delivered part of the profits to Wang Moubo. The two parties lacked clear agreements on risk burden, profit distribution, entrusted financial management matters, etc., and therefore determined that the nature of the legal relationship in this case was a contractual dispute.
Combined with the evidence in the case, after Wang Moubo learned about the speculation of USDT virtual currency through a certain electronic platform, he paid the speculation funds to Huang Moubin and registered four virtual currency accounts through Huang Moubin, which Wang Moubo could check himself.
As a person with full civil capacity, Wang Moubo should carefully identify investment projects. Formal foreign exchange transactions have legal financial platforms, and the returns are risky and volatile. Wang Moubo believed others' propaganda that the investment returns were high and risk-free. He should have known that the investment was not a formal foreign exchange financial transaction, and Wang Moubo was at fault for this.
Virtual currency does not have monetary attributes such as legal compensation and compulsory nature, does not have the same legal status as currency, cannot and should not be circulated and used as currency in the market. The USDT virtual currency transaction involved in the case is essentially an act of illegally engaging in token issuance and financing without approval. This behavior disrupts the normal financial order and may also cause systemic financial risks, threaten the property safety of the people, and damage the public interest. It is an invalid legal act. The losses and risks caused by this should be borne by Wang Moubo himself.
The judgment was then: the appeal was dismissed and the original judgment was upheld.
Judge Reminder
The People's Bank of China, the Office of the Central Cyberspace Affairs Commission of the Communist Party of China, the Supreme People's Court, the Supreme People's Procuratorate, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange and other departments issued the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Transaction Speculation" on September 15, 2021, stipulating that virtual currency does not have the same legal status as legal currency.
Virtual currencies such as Bitcoin, Ethereum, and Tether have the main characteristics of being issued by non-monetary authorities, using encryption technology and distributed accounts or similar technologies, and existing in digital form. They are not legal tender and should not and cannot be circulated and used as currency in the market.
There are legal risks in participating in virtual currency investment and trading activities. Any legal person, non-legal person organization or natural person who invests in virtual currency and related derivatives and violates public order and good morals shall have the relevant civil legal acts invalid, and the losses caused by it shall be borne by themselves. The client's request for the trustee to return the investment and interest shall not be supported.
Author: Ding Li, Li Zijing Source: People's Court Daily
