A few days ago, the dispute between Chen Lei, the former CEO of Xunlei, and his old club was getting worse. Xunlei alleged that the Shenzhen Municipal Public Security Bureau has filed investigations against Chen Lei, the former CEO of the company suspected of embezzlement, suspected of embezzling company assets in a false transaction link, creating false contracts to obtain company funds, involving huge amounts of money, and “suspected of embezzling thousands of companies. Ten thousand funds are used for illegal currency speculation that is explicitly prohibited by the state.” Chen Lei pointed out that there was a problem with Xunlei’s own audit, so he “poured dirty water” on him.
The cryptocurrency industry is particularly sensitive to this sentence. Is the general “currency speculation” explicitly prohibited by the state? What kinds of currency speculation may involve illegal activities? Is Xunlei labeling Chen Lei, or is Chen Lei really suspected of related illegal acts?
First, normal currency speculation is not currently defined as illegal.
In 2013, the Central Bank and other five ministries issued the “Notice on Preventing Bitcoin Risks”, stipulating that “Bitcoin transactions are a kind of commodity trading behavior on the Internet, and ordinary people have the freedom to participate under the premise of their own risks.”
Xia Wei, a professional lawyer in the cryptocurrency industry, pointed out that normal currency speculation is not illegal. First of all, from the birth of Bitcoin to the present, the national legislature has never stipulated that speculation is illegal. At the national level, the documents of the five ministries and commissions of the Central Bank in 2013 (Yinfa [2013] No. 289) are the earliest documents that have made relevant regulations on digital currencies. The documents characterize Bitcoin as a specific virtual commodity, and the characterization of Bitcoin has been used until right now. Even the documents of the eight ministries and commissions in 2017 (the 94 documents) did not prohibit the speculation of coins at all, but only prohibited the related business activities of token financing (1CO) and domestic exchange operations. The basic principle of the criminal law is that no criminal act shall be convicted and sentenced if the law does not expressly stipulate it as a crime. We don’t have to worry about the legality of those that are not provided for by the law.
Secondly, the judiciary has never identified speculation as an illegal or criminal act. At present, there are more than 2,000 criminal judgments involving digital currencies in my country, but none of them are suspected of crimes due to speculation. The main reason is that the criminal suspects are suspected of pyramid schemes, fraud, theft and other criminal acts clearly stipulated in the criminal law. Among these crimes, digital currency mainly acts as a media role, which is also related to the ease of circulation and anonymity of digital currency. But we can’t think that cryptocurrency speculation is illegal and criminal just because of the characteristics of digital currency, just like we can’t think that buying and selling watermelon knives is illegal and criminal just because watermelon knives are suitable for stabbing people.
Finally, national policies have been promoting the development of digital currency, from the collective study of the Central Political Bureau in 19 years to the central bank’s promotion of national digital currency issuance. The policy level is constantly increasing to promote the development of the blockchain industry. Recently, Shenzhen has started to experiment with national digital currency payments, and the full roll out is just around the corner. From this perspective, it is unthinkable to characterize currency speculation as an illegal or criminal act.
Second, which speculation behaviors are illegal?
Lawyer Xia pointed out that the following actions related to “coin speculation” are suspected of illegal:
1. Use digital currency as a tool to commit criminal acts specified in the criminal law, such as issuing digital currency for pyramid schemes, issuing digital currency for fraud, etc.
2. The use of digital currency to fundraise in tokens such as 1CO has been characterized by the central bank as an illegal public financing activity without approval, suspected of illegal sale of tokens and securities, illegal issuance of securities, etc.
3. The use of digital currency to conduct illegal foreign exchange operations. Such behavior is suspected of disrupting the order of the financial market and often constitutes the crime of illegal operations.
Attorney Huo Yijie previously stated that as of now, any platform and institution in my country is strictly prohibited from engaging in the exchange business between legal currency and tokens, “virtual currency”, or buying or selling or buying and selling tokens or “virtual currency” as a central counterparty. Or provide pricing and information intermediary services for tokens or “virtual currencies.”
During Chen Lei’s Xunlei period, the development of “Playing Cloud” that can be mined was hyped in the currency circle. We have no way of knowing whether Chen Lei received cryptocurrency and exchanged it with foreign currencies, and whether this behavior would be recognized as 1CO. But this behavior should not be Chen Lei’s personal behavior, but Xunlei’s behavior.
Third, is Chen Lei breaking the law?
In the final analysis, if Chen Lei personally speculates in coins, it is not illegal. However, in conjunction with Xunlei’s official statement of “misappropriating tens of millions of funds from the company”, using company funds to speculate coins is likely to involve illegality. As for the definition of “appropriation” itself, if it is accurate, it has nothing to do with currency speculation and is itself an illegal act.
Lawyer Xia pointed out that whether Chen Lei violated the law was ultimately determined by the court. Before the court verdict, no agency should make a characterization of his behavior and engage in a “media trial.” So Xunlei’s statement is questionable. As for the conduct that may be engaged in, if it is indeed suspected of illegality, it may be the above three behaviors, or it may be related to suspected embezzlement or embezzlement of funds.
According to the law, personnel of companies, enterprises, or other units, using the convenience of their positions, illegally occupy their own property. If the amount is relatively large, they shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention; if the amount is large, they shall be sentenced to five years. The above-mentioned fixed-term imprisonment may also be sentenced to confiscation of property.
The staff of a company, enterprise or other unit, using the convenience of their position, misappropriated the funds of their unit for personal use or loaned to others, the amount is relatively large, not repaid for more than three months, or the amount is not more than three months Larger ones, who engage in profit-making activities, or carry out illegal activities, shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention; those who embezzle a large amount of funds from their own unit, or the amount is not refundable, shall be sentenced to fixed-term imprisonment of three to ten years.
