Is it a crime to promote Web3 projects with good intentions? How can practitioners safely avoid the trap of "non-trust crime"? ——Web3 Entrepreneurship Criminal Risk Prevention Guide (VIII)

Authors: Gao Mengyang, Liu Fuqi

With the arrival of the final chapter of this series, we have systematically sorted out the high-frequency crimes that practitioners in the field of virtual currency may be involved in, such as pyramid schemes, illegal operations, and money laundering. As the final work of the series, this article will focus on the crime of illegal use of information networks (hereinafter referred to as "non-trust crimes"), which is easily overlooked but extremely "lethal" in practice. Although it is a minor crime, it is often the first choice for prosecution and may even become a "breaking ice weapon" to break through the criminal case.

Revelation from Typical Cases

Case 1: The tragedy of information platform

A Web3 Chinese information website is a blockchain data information display platform, which mainly provides virtual currency data analysis, market analysis and trading platform ranking and rating services, with more than 200,000 daily active users. A project paid for ranking and promotion on the platform, but the project collapsed and was identified as a "pig-killing" scam. The staff of the information website were then detained and investigated by the police for suspected "non-trust crimes".

Case 2: KOL recommendation

Wang is a senior blockchain lecturer. During the course, Wang set up a VIP WeChat communication group at the request of a "student". The "student" and Wang recommended a quantitative trading platform and a cryptocurrency trading website to other students in the group. However, the students did not expect that after a period of trading, they would not be able to transfer cash or log in to the App. Three months later, the platform and the website absconded with the money. Wang thought that he did not participate in the operation of the platform or provide any assistance, so he could stay out of it. However, the court determined that the WeChat group involved in the case was used for illegal and criminal activities such as fraud, and Wang was guilty of non-trust crime.

It can be seen that non-trust crimes often have the characteristics of "tracing back to upstream crimes". When implementing related behaviors, the lack of compliance awareness leads to the situation where one should know but does not know, which easily leads to falling into the scope of illegal crimes. At the same time, the degree of risk is related to the scope of information dissemination.

So, let us first look at the relevant legal provisions on the crime of non-faith.

What is the sin of non-belief?

According to Article 287-1 of the Criminal Law of the People's Republic of China, if anyone uses an information network to carry out any of the following acts, he shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention and shall be fined or fined alone if the circumstances are serious:

(1) Establishing websites or communication groups for illegal or criminal activities such as committing fraud, teaching criminal methods, producing or selling prohibited or controlled items;

(2) Publishing information related to the production or sale of prohibited items, controlled items, such as drugs, guns, pornographic materials, or other illegal or criminal information;

(3) Publishing information for the purpose of committing fraud or other illegal or criminal activities.

In simple terms, the non-trust crime mainly regulates three types of behavior: ① Establishing fraudulent websites/communication groups ; ② Publishing information on contraband transactions ; ③ Publishing information for illegal and criminal activities . The first two types are common in capital operations and illegal transactions, and are also typical and easy to detect in terms of their manifestations. The last type is a high-incidence area in the Web3 field. Many times, due to negligence, Web3-related information including virtual currency is published for projects or individuals involved in crimes. As a result, the virtual currency-related business that commits crimes is objectively promoted and publicized, and eventually falls into the regulation category of non-trust crime. It should be noted that unlike the clear nature of providing assistance in the crime of aiding trust, the extension of the non-trust crime seems to be broader. If the above-mentioned behaviors are implemented, once there is an illegal crime upstream, it is not necessary to confirm whether the actor is aware of it, and it will fall into the category of non-trust crime.

In combination with the above cases, a Web3 Chinese information website uses in-depth analysis of network information to present the market trends and trading quotes of digital currencies to users, helping users to accurately understand market changes and price fluctuations. It also comprehensively considers various factors of virtual currency transactions, scientifically classifies and sorts virtual currency trading platforms, and provides valuable references for users' investment choices. As a person with certain experience in the virtual currency industry, Wang explained to the students the basic knowledge of virtual currency concepts, principles, market status, etc., and also analyzed the strategies, risk prevention and control, and investment skills of virtual currency transactions, and guided the students to conduct trading operations.

The above-mentioned behaviors are all neutral business behaviors, but under this seemingly reasonable appearance and purpose, it involves providing similar information release for illegal behaviors. Therefore, no matter whether it is true or paid, once the upstream crime is found, it is very easy to be identified as a non-trust crime. In addition, although the circumstances and profits involved in this situation are relatively minor, in current practice, the probability of being sentenced to actual punishment is much higher than that of suspended punishment.

Well, the upstream crime is certainly not limited to the crime of fraud. In addition to the more conventional high-frequency crimes in the virtual currency industry, there are some upstream illegal behaviors that may lead to non-trust crimes. In the "Announcement on Preventing the Risk of Virtual Currency Trading Speculation" and the "9.24 Notice" of ten ministries and commissions, it is mentioned that "it is not allowed to provide online business premises , commercial displays , marketing and publicity , paid diversion and other services for virtual currency-related business activities." It also mentioned that " overseas virtual currency exchanges providing services to residents in China through the Internet are also illegal financial activities ." Of course, Mankiw has reservations about the effectiveness of the department's regulations in the determination of criminal charges, but based on the document, it cannot be denied that in practice the relevant behaviors will involve certain risks of non-trust crimes.

Criminal Compliance Guide

In summary, in order to prevent practitioners in the field of virtual currency from inadvertently committing fiduciary crimes to a greater extent, combined with the case handling experience of Mankiw’s legal team, we can do the following:

1. Set up a dynamic disclaimer

As a prior disclaimer, although its effectiveness in practice may not be that great, this kind of prior risk avoidance awareness is also worth learning from.

2. Strengthen risk management and monitoring mechanisms

Whether it is a platform or an individual, all businesses engaged in the virtual currency industry should conduct thorough investigations into related transaction behaviors and the business itself, and establish a "blacklist" to conduct regular reviews of long-term businesses. In this case, abnormal situations or aspects that may require attention can be discovered in a timely manner, and further avoid being involved in illegal and criminal activities and avoid the possibility of being involved in a crime.

3. Avoid promoting cryptocurrency business activities without KYC

The publicity here includes various marketing, commercial displays and paid traffic diversion businesses. If you fundamentally avoid such matters, you can avoid the risk of being involved in non-trust crimes. If you find any abnormalities, you should immediately take relevant remedial measures or seek help from professional lawyers.

4. Regularly learn about compliance experience in the virtual currency industry

Virtual currency practitioners need to actively learn relevant compliance experience. On the one hand, they can avoid losses caused by missteps as much as possible, and on the other hand, they can avoid being involved in illegal and criminal activities as much as possible.

Conclusion

In the wave of innovation of Web3, compliance is not only a moat but also a lifeline. A random forwarding or an unverified advertisement may become the fuse of criminal risk. Although the crime of non-trust may not seem to be a serious crime, it is also a potential major legal risk in the virtual currency industry. Relevant practitioners must strengthen compliance management to ensure the legal and compliant development of the business. After all, in the world of blockchain, the most unchangeable thing should be the compliance awareness of practitioners. Although this series has come to an end for the time being, Attorney Mankiw will continue to output various common compliance issues of blockchain to build a legal defense line for Web3 entrepreneurs. We look forward to your attention and support!