How should the theft of someone else's virtual currency be classified? The court's opinion: It should be classified as the crime of illegally obtaining data from a computer information system, not theft.

In currency-related criminal cases, theft of other people's virtual currency has always been a frequently occurring type of crime in judicial practice.

Author: Lawyer Shao Shiwei

Cover: Photo by Sasun Bughdaryan on Unsplash

In currency-related criminal cases, theft of other people's virtual currency has always been a frequently occurring type of crime in judicial practice.

However, it's important to note that if the case is classified as theft, and the amount involved is substantial, the maximum penalty can be life imprisonment ; while if it's classified as illegally obtaining data from a computer information system, the maximum statutory sentence is only seven years . Therefore, the different charges in cryptocurrency theft cases often mean completely different criminal consequences for the perpetrator and their family.

However, since there is currently no clear superior law that makes unified provisions on the criminal law attributes of virtual currency, in practice, there has been long-standing controversy over how to define the theft of virtual currency, and a stable and consistent standard for judgment has never been formed.

From a judicial practice perspective, when determining the criminal nature of the theft of others' virtual currency, law enforcement personnel mainly follow these approaches:

First, virtual currency should be recognized as property under criminal law, and thus prosecuted as theft.

Second, virtual currencies will be classified as electronic data in computer information systems, and criminal liability will be pursued for the crime of illegally obtaining data from computer information systems.

Third, it is believed that the relevant behavior infringes on both property rights and information system security, constituting a case of concurrent offenses, and the more serious crime should be chosen for punishment. In practice, it is often treated as theft.

From the perspective of lawyers advocating for leniency in such cases, the defense regarding the amount involved is just as important as the defense regarding the nature of the crime. The defense regarding the amount involved requires specific analysis based on the specific circumstances. Therefore, today's focus will be on how to conduct a defense regarding the nature of a cryptocurrency theft case, and what defense strategies lawyers can employ.

From a criminal defense perspective, in cases of cryptocurrency theft, especially those involving large sums of money, whether the charge is established and how it is characterized become key factors in determining the length of the sentence.

Therefore, this article will focus on the core issue of how to criminally characterize the theft of virtual currency, and, in conjunction with judicial practice, explore the qualitative defense strategies that lawyers can adopt in such cases.

I. How the theft of virtual currency is classified as a crime depends on how the investigators interpret "virtual currency".

1. How investigators understand virtual currency often directly influences the direction in which a case is characterized.

In cases of cryptocurrency theft, whether it should be classified as theft or the crime of illegally obtaining data from a computer information system often depends, at a deeper level, on how the investigators understand the attributes of cryptocurrency—whether they regard it as property or as data in a computer information system.

Over the years, Attorney Shao has been engaged in defense work in criminal cases in the fields of Web3, virtual currency and new economy. In the process of handling cases in many parts of the country and communicating with case handlers in different regions, it can be clearly felt that some case handlers' understanding of virtual currency has gradually shifted from early unfamiliarity or even rejection to having a certain basic understanding of mainstream virtual currencies such as BTC and USDT.

Furthermore, due to the anonymity and cross-border circulation of cryptocurrencies, a large number of illicit and gray-market activities use cryptocurrencies as a means of payment, and related cases are not uncommon in practice. Even in publicly reported cases, there have been numerous instances of cryptocurrencies being used as a means of bribery.

These cases have also objectively reinforced the judgment of some investigators: although domestic policies explicitly prohibit virtual currencies from circulating as currency, in practice they can indeed be "converted into money ".

Furthermore, the "deep-sea fishing" and "profit-driven law enforcement" that were highly advocated in previous years for cases involving currency, and the phenomenon of law enforcement officers in some areas directly disposing of and selling virtual currencies during the police investigation stage, also reflect the law enforcement officers' recognition of the value of virtual currencies.

For this reason, in many cryptocurrency theft cases, more and more investigators tend to recognize its property nature and apply theft charges accordingly. However, from a criminal defense perspective, directly classifying a case as theft when the amount involved is extremely large often means that the perpetrator's potential sentence will be "unlimited."

For example, in the theft case of Zhao Mou sentenced by the Dalian Intermediate People's Court [(2021) Liaoning 02 Criminal Final 258], the defendant stole all of the victim's virtual currency, which was valued at over 530,000 yuan according to appraisal. However, even after the defendant returned all the stolen money to the victim and obtained the victim's forgiveness, the court of first instance still sentenced the defendant Zhao Mou to ten years imprisonment for theft. Subsequently, on appeal, the second instance court changed the sentence to four years imprisonment for the crime of illegally obtaining computer information system data.

Therefore, from the perspective of criminal defense, in cases of cryptocurrency theft, disputes over the nature of the crime are often more directly influential in determining the sentencing outcome than disputes over the amount involved.

2. Is the USDT stablecoin being treated like a "stock"?

In a case handled by Attorney Shao involving a gang that stole tens of millions of USDT worth of RMB, the evidence was extremely extensive and complex, with some key pieces of evidence missing. As a result, when discussing the client's actual profits, our calculations as defense counsel differed from the amount alleged by the prosecution by several million RMB.

However, during my communication with the judge regarding the aforementioned discrepancy, one sentence he uttered still remains vivid in my memory. The judge stated, " USDT is like a stock; it's normal for its price to fluctuate wildly ."

In my view, Tether (USDT), as a stablecoin pegged to the US dollar, should have a relatively fixed price fluctuation range. This should be basic common sense for every investigator handling cryptocurrency cases. However, as can be seen from the above communication, in these cases that could result in sentences of more than ten years, the fundamental attributes of cryptocurrencies are still not fully understood, and the judges' understanding of cryptocurrencies remains significantly flawed.

Therefore, in criminal cases involving cryptocurrency, not all investigators can accurately understand the technical characteristics and value attributes of virtual currencies. If experienced lawyers are not involved in the criminal defense, details such as the nature of virtual currencies, on-chain fund transfers, and the determination of amounts may be overlooked, often directly affecting the case's characterization and sentencing.

Next, this article will take a virtual currency theft case tried by a Chongqing court as an example to further analyze the defense strategies for determining the charges that lawyers can learn from in such cases.

Cryptocurrencies are essentially data and should not be the object of theft.

In the case of Tian Moumou illegally obtaining computer information system data [(2022) Yu 0241 Criminal First Instance No. 132] tried by the Chongqing court, the defendant Tian Mou applied for an imToken digital wallet for the victim and helped the victim transfer all of their virtual currency to the digital wallet. However, during the transfer of virtual currency, Tian Mou secretly saved the victim's digital wallet address and password by taking photos. Later, on a certain day, Tian Mou logged into the victim's digital wallet and transferred and sold the Ethereum in the wallet to cash out.

In this case, there is also a debate about whether the victim's actions should be classified as theft, illegal acquisition of computer information system data, or the more serious crime. The Chongqing High People's Court's opinion that this case should be classified as illegal acquisition of computer information system data is worth considering, and is briefly summarized as follows[i]:

1. From the perspective of whether virtual currency has the attributes of property: Does virtual currency belong to "property" in the sense of criminal law?

The Chongqing High Court held that commodities possess both exchange value and use value, but in practice, virtual currency is difficult to serve as a general equivalent in commodity exchange; the use of virtual currency can only realize its implicit use value after it is exchanged with real currency or products; virtual currency must rely on and be stored in a specific electronic information system, and its amount and value must be displayed through specific electronic devices in a certain information state, which is significantly different from the way property is stored and its value is displayed in the general sense.

Therefore, the essential attribute of virtual currency should be electronic information data, which does not fall under the category of property protected by criminal law.

[Attorney Shao's Analysis]

The Chongqing High Court's consideration of whether virtual currency is property or data is based on the domestic policy that defines virtual currency as "a specific type of virtual commodity." Therefore, starting from the basic principles of the use value and exchange value of commodities in Marxist political economy, it denies the value of virtual currency as a commodity. (However, property in the sense of criminal law is not limited to commodities. If virtual currency is determined not to be a commodity with exchange value and use value, it does not further address whether virtual currency, if it is not a commodity, is also not property in the sense of criminal law outside of commodities.)

2. From the perspective of practicality in sentencing: If the crime is to be punished as theft, how should the amount involved be determined?

The Chongqing Higher People's Court held that if the crime is prosecuted as theft, there is a problem in determining the value of the completed theft, namely, whether the value of the virtual currency should be based on the defendant's profit, the victim's purchase price, or the value at the time of transfer, making it difficult to achieve true fairness and justice. However, according to the relevant provisions of the "Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering the Security of Computer Information Systems," illegal gains exceeding five times 5,000 yuan constitute a particularly serious circumstance under the crime of illegally obtaining data from computer information systems as stipulated in the Criminal Law, and should be sentenced to 3 to 7 years in prison. The sentencing standard for this crime is more definite and conducive to unifying the standards of judgment.

[Attorney Shao's Analysis]

This viewpoint explains why it is more reasonable to classify such behavior as the crime of illegally obtaining data from computer information systems, from the perspectives of fairness, efficiency, and uniformity of judgment. This line of thinking has strong reference value for defense lawyers representing clients in cases involving virtual currency.

However, it's important to recognize that cases in judicial practice are often more complex and diverse. In the Chongqing case, the defendant directly sold the stolen cryptocurrency for RMB. In other cases, defendants may have traded cryptocurrencies themselves, incurring losses, converting the cryptocurrency into other Altcoin, or the amount of profit involved may be substantial but difficult to accurately determine based on existing evidence. In these situations, demonstrating that the act constitutes illegal acquisition of computer information system data, rather than theft, clearly requires defense lawyers to employ more nuanced judgments and more targeted defense strategies.

In conclusion

The lack of clear and unified legal norms and judicial guidelines in criminal cases involving virtual currencies has led to long-standing controversies in judicial practice. These controversies, in themselves, mean that there is room for defense in these cases and create opportunities for litigants to obtain more favorable judgments.

For defense lawyers, the key is not merely to accurately understand how these legal gaps manifest in specific cases and develop targeted defense strategies accordingly. Rather, it lies in engaging in continuous, in-depth, and rational communication with investigators, focusing on the facts of the case itself, clarifying the attributes of virtual currency, the nature of the actions involved, and the boundaries of evidence, thereby achieving the goal of an effective defense. This helps clients obtain the fair and deserved judgment within the existing legal framework.

[i] Tian Moumou's case of illegally obtaining computer information system data—the determination of the crime of transferring and selling other people's virtual currency https://www.pkulaw.com/pfnl/08df102e7c10f206d9a6e4d613e327989e972c437c755759bdfb.html?keyword=USDT%20%E8%99%9A%E6%8B%9F%E8%B4%A7%E5%B8%81

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