Written by: Lawyer Liu Zhengyao
Foreword
With the popularization of blockchain technology, cryptocurrency trading has moved from the geek community to the public eye. However, this has brought not only wealth myths but also increasingly serious legal risks. In cryptocurrency-related criminal cases, the most frequently charged offenses are "aiding and abetting cybercrime" (referred to as " aiding and abetting ") and "concealing or disguising the proceeds of crime" (referred to as "concealment").
On the front lines of investigations, the author frequently hears the most instinctive defenses from the parties involved, and even their families: "I really didn't know that money was illegal!", "I was just helping a friend transfer money and earning some commission; I knew nothing else about it," and "I was just selling cryptocurrency normally on the exchange; how would I know if the other party's money was tainted?"
"Ignorance" sounds like a logical explanation. After all, "ignorance is no excuse" is a relatively simple social concept. Specifically, in China's criminal law, it is also a manifestation of the law on "subjective malice." But in judicial practice, are the three words "ignorance" truly a "get-out-of-jail-free card"?
The answer is far more brutal than most people imagine. In the judicial determination of virtual currency cases, "lack of knowledge" often doesn't depend on "what you said," but rather on "what you actually did." The author will combine legal provisions and practical experience to deeply analyze the logic behind determining "subjective knowledge" in virtual currency cases.
In criminal law theory, constituting a crime usually requires a unity of subjective cognition and objective behavior. For currency-related crimes, whether it is the crime of aiding and abetting or concealing a crime, the core element requires the perpetrator to "knowingly" provide assistance to others in committing crimes using information networks.
However, in this context, "knowing" in a legal sense is not the same as "knowing for certain" in the testimony of the parties involved.
(I) Two Forms of "Knowing"
In simple terms, within the legal evaluation system, "knowingly" encompasses two levels:
First, establish intent. This means knowing full well that the other party is a fraudster, a gambling website, or someone who has embezzled funds, yet still providing USDT exchange or transfer services. In this case, the evidence is conclusive and there is no room for argument.
Second, general intent. This is also what we often call "should have known". Although the perpetrator did not know the specific type of the upstream crime (whether it was fraud, gambling, or proceeds of official misconduct), based on their cognitive ability and the abnormality of their transaction behavior, they should have realized that the source of funds was illegal, yet they still allowed this outcome to occur.
(ii) " Presumed knowledge " in judicial interpretation
From the perspective of the judiciary, in order to break the dilemma that "it is impossible to convict a suspect if he does not confess," the Supreme People's Court and the Supreme People's Procuratorate (also known as the "two highs") have issued a series of judicial interpretations, establishing the principle of "inferring subjective intent from objective facts."
For example, the "Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Illegally Using Information Networks and Assisting Information Network Crimes" issued in 2019 stipulates that when determining whether a person has "knowingly" committed an act, the following factors can be considered comprehensively:
The transaction price is obviously abnormal;
Using specific encrypted communication software to evade supervision;
Frequently using multiple bank accounts and payment accounts for fund transfers;
Those who refuse to provide genuine identity verification.
In the realm of cryptocurrencies, this means that the law doesn't need a confession from you admitting you "knew" about it. As long as your objective behavior pattern matches the characteristics of money laundering, even if you shout "I didn't know" until you're hoarse, the law will still presume you "knew" about it.
In judicial practice, the battle between defense lawyers and their clients often centers on how to break the judicial authorities' chain of "presumed knowledge." A simple "I was unaware" is insufficient; only by providing objective evidence to prove that one "did indeed fulfill a reasonable duty of care" or "was indeed deceived" can one potentially achieve exemption from liability.
(a) Why is your claim of "lack of knowledge" not accepted?
If your behavior contains any of the following "red line" characteristics, insisting on "ignorance" will almost certainly be considered sophistry by the judicial authorities, leading to conviction and sentencing:
First, there's the allure of high profits, which goes against market principles.
For example, the profit margin for normal USDT arbitrage is extremely thin. If someone offers you profits a few cents or even a few dimes above the market price, or lets you earn thousands or tens of thousands in "running fees" a day, as an adult, you should realize that there must be something fishy going on. The conclusion is that being greedy for high and abnormal returns is the most direct evidence of subjective knowledge.
Secondly, their behavior is "sneaky".
For example, when using niche communication software, the two parties in a transaction do not communicate via WeChat or Alipay, but instead download software with self-destructing messages, such as Telegram or Batman, and the chat content involves industry slang such as " card testing ," "U-merchant," and "distribution."
Alternatively, they may circumvent KYC (Know Your Customer) verification process by failing to verify the other party's identity during transactions, or by knowingly allowing the other party to use someone else's account for transfers (transfers not under the same name).
Finally, there are "obvious abnormalities" in trading habits.
Common high-risk behaviors include: 1. Quickly transferring funds in and out without leaving a balance; 2. Applying for multiple bank cards or acquiring bank cards and U-shields from others for transactions; 3. After a bank card is frozen, not only not stopping transactions, but also attempting to unfreeze it or change cards to continue operating, etc.
In the above circumstances, the so-called "lack of knowledge" will be regarded as "using ignorance as a pretext to commit intentional crimes" and "using this to infer that."
(ii) What kind of "lack of knowledge" can truly absolve one of liability?
The presumption of knowledge is not irrefutable. In individual cases, if the defendant can prove that they have fulfilled the due diligence expected of an ordinary person , then "lack of knowledge" is a valid and valid defense. The following situations offer significant acquittal or non-prosecution options in practice, specifically in the following aspects:
First, strict KYC verification records.
If you are an OTC merchant and can provide complete chat logs proving that you requested the other party's ID card, bank statements, and conducted video verification and a commitment to assume all risks, and if the information provided by the other party appears very authentic (even if it is later proven to be photoshopped, as long as the photoshopping is convincing enough to fool the average person), then in principle you have no subjective fault.
The core logic here is: "I investigated, he lied to me, I am a victim, not an accomplice."
Second, the legitimacy of the trading venue and prices.
If the transaction takes place on a reputable exchange like Binance or OKX, rather than a private, unregulated platform or a purely offline cash transaction, and the price strictly adheres to the market exchange rate of the day, with no attempt to profit from any additional premium, then it is a "positive" situation for the parties involved.
Third, the specific circumstances under which one is deceived.
For example, in "pig butchering" scams, victims are sometimes tricked into investing. When they try to withdraw their funds, the scammers claim it's a "company financial transfer," but in reality, they transfer the fraudulent money into their accounts to buy cryptocurrency. In such cases, the victim is already a victim of the scam and has chat logs to prove they were brainwashed; they are highly likely to be exempt from liability.
For example, in a more reasonable relationship of trust: if a relative or a close friend asks for help for a reasonable reason (such as a limit on the amount of money), and there is no obvious abnormal transfer of benefits, it is difficult to determine that the act of helping once in a while is a matter of subjective knowledge.
Returning to the question in the title: Can "lack of knowledge" truly absolve one of liability in cryptocurrency cases?
Attorney Liu concluded that verbal claims of "ignorance" are worthless; the key is "no fault" supported by evidence.
Criminal law targets those who knowingly commit crimes, but it will not let those who pretend to be asleep get away with it. As the "Cut Off Credit Cards" campaign deepens and anti-money laundering efforts intensify, those involved in cryptocurrency transactions must understand that the legal standard for determining "subjective knowledge" is no longer limited to confessions, but rather requires a comprehensive objective profile of the behavior.
For traders in the crypto, Attorney Liu would like to offer one final piece of advice: Don't use "ignorance" to challenge the "iron will" of the law. If you:
When someone chooses to ignore suspicions about the source of funds for a difference of a few per thousandths in interest; or agrees to conduct private transactions in encrypted chat software for convenience; or sees their bank card has been blocked but continues operations with a different card...
You may have already put yourself within the reach of criminal law. True immunity comes not from post-incident explanations, but from prior compliance and restraint.
