What should I do if I help someone lose money by investing in virtual currencies?

Source: Mankiw Blockchain Law

Introduction

I want to play with coins, but the currency circle is too deep and I don’t understand what to do? Find someone who understands coins to help you play with coins!

Bitcoin has surged again. After hearing about it, Xiao Li also wanted to invest in some virtual currencies. But he was shy and knew nothing about virtual currencies. Xiao Li got introduced to people in the currency circle through friends. The "man of the hour" Xiao Zhang. After contact and communication with Xiao Zhang, Xiao Li was deeply impressed by Xiao Zhang’s omnipotent charm in the currency circle and decided to let Xiao Zhang help him play coins. Although Xiao Li knows nothing about the currency circle, he has a strong sense of risk. In order to avoid losses, Xiao Li asked Xiao Zhang to issue an IOU: "Xiao Zhang borrowed 300,000 yuan from Xiao Li for house decoration, and agreed on interest and repayment date." . And Xiao Zhang promised that he would definitely make money. When everything was ready, Xiao Li transferred 300,000 yuan to Xiao Zhang's account and asked Xiao Zhang to help him play with coins. After that, Xiao Li waited at home for the virtual currency to rise sharply and made a lot of money. The weather is unpredictable and unpredictable. Suddenly one day, Xiao Zhang told Xiao Li that the trading platform he helped to purchase virtual currency was forced to close due to suspicion of pyramid schemes, money laundering, fraud and other criminal offenses, and he could not trade (all the money was lost!!!). Xiao Li asked Xiao Zhang to repay the loan in accordance with the loan agreement, but Xiao Zhang refused to repay.

Under the introduction of a friend, Xiao Li found lawyer Mankiw with an IOU.

01Are virtual currencies protected by law?

First of all, let’s take a look at my country’s relevant legal regulations on virtual currency. Article 127 of the Civil Code If the law has provisions on the protection of data and network virtual property, those provisions shall prevail. According to the "Notice on Further Preventing and Dealing with Speculation Risks in Virtual Currency Transactions" (Yinfa [2021] No. 237), virtual currencies are not legally compensable and should not and cannot be used as currency for circulation in the market. Domestic and foreign institutions are prohibited from engaging in Business activities related to virtual currency and its derivatives. If any legal person, unincorporated organization or natural person invests in virtual currency and related derivatives, which violates public order and good customs, the relevant civil legal actions will be invalid.

In other words, from the perspective of the Civil Code, the law protects virtual assets, but what constitutes virtual property must be stipulated by other laws. However, my country's relevant policies maintain a cautious attitude towards virtual currencies and prohibit business activities related to virtual currencies and derivatives through departmental regulations.

So, how will the court judge the act of entrusting others to invest in virtual currencies?

02How will the court rule in cases involving virtual currency investment?

Case 1: Rejection of request

Li helped Lu invest in the virtual currency "Ether "Fang", Li issued an IOU to Lv, stating that Li borrowed 290,000 yuan from Lv in the name of home decoration, and stated the date of the loan, ID number, and phone number. And the "payee" indicated at the bottom of the IOU is Ge's Agricultural Bank of China account. On the same day, Lu transferred 50,000 yuan to Li through online banking and transferred 170,250 yuan to Ge through mobile banking. Later, Li invested in virtual currencies in the name of Lv. Due to abnormalities on the trading platform, the "Ethereum" currency could not be traded and the trading platform was closed. In the end, Lv went to court to demand that Li repay the principal and interest.

After trial, the court held that although Li issued an IOU to Lv, the WeChat chat records between the two parties and other evidence were sufficient to prove that Lv Hengjin delivered the money to Li Juan for investment in virtual currency, and Li Juan transferred the money to Li Juan. The fact that the proceeds from trading "Ethereum" were paid to Lu Hengjin. There was no private lending relationship between the two parties, so the plaintiff Lu's claim was dismissed. Lu appealed to the Intermediate People's Court of Lianyungang City, Jiangsu Province. The court of second instance held that the behavior between the two parties was inconsistent with the behavior between the parties involved in general private lending, which was enough to form a reasonable agreement that the loan between the two parties was actually an entrusted virtual currency transaction. It is suspected that the existing evidence conditions are not enough to confirm that the loan relationship formed between the two parties based on the IOU is the true expression of intention between the two parties, and the original judgment is upheld in accordance with the law. [(2021) Su 07 Min Zhong No. 4842]

Case 2: Each bears 50% responsibility

Cheng helped Li invest in virtual currency, and Li under Cheng’s guidance Li made virtual currency investments in his own name. Later, Li logged into his personal account using a dynamic verification code on his mobile phone. After logging into the account, he could not check the status of the principal and could not operate to withdraw the principal. As a result, he had investment doubts and asked Cheng to return the investment money. The two parties discussed this issue. A dispute occurs. And the WeChat records between Cheng and Li show that Cheng promised to return the principal of Li’s investment of 90,000 yuan.

Li first filed a lawsuit with the court for private lending. The first instance rejected Li’s claim, and the second instance upheld the original judgment. Li once again filed a lawsuit with the court of first instance over a dispute over a private entrusted financial management contract. After hearing, the court held that a dispute over an entrusted financial management contract existed between the two parties. ) stipulates that its behavior violates mandatory provisions and is invalid. After determining that the entrustment was invalid, the court based on the faults of both parties, held that Cheng was at fault for damaging Li's trust interests, and Li was also at fault for lacking rational consideration of investment risks, and ruled that both parties should bear 50% of the liability respectively. [(2022) Qing 01 Min Zhong No. 1133]

03Mankiw Lawyer Analysis

< p>Back to the case at the beginning of our article. The relationship between Xiao Li and Xiao Zhang is called a loan but is actually an entrusted virtual currency investment contract. There is no true intention of borrowing between Xiao Li and Xiao Zhang. The two parties have not formed a private lending relationship, and the entrusted virtual currency investment has violated the contract. Mandatory provisions are invalid.

The commission contract between Xiao Li and Xiao Zhang is invalid. Xiao Li entrusted the investment based on his absolute trust in Xiao Zhang personally. Virtual currency investment carries huge risks. Xiao Zhang should fulfill the risk disclosure obligation. However, his promise to make profits and the issuance of IOUs prove that he has not fulfilled the risk disclosure obligation. There is Gross fault. As an investor, Xiao Li lacks in-depth understanding of the proposed investment field and product information, lacks careful consideration and blind trust in the qualifications and abilities of the trustee, and lacks rational consideration and judgment in the face of hugely risky virtual currency investments, which also caused the loss of principal. There are important reasons as well as faults.

Article 157 of the Civil Code: After a civil legal act is invalid, revoked or determined to be ineffective, the property obtained by the actor as a result of the act shall be returned; if it cannot be returned or is not returned If necessary, compensation should be made at a discount. The party at fault shall compensate the other party for the resulting losses;If both parties are at fault, they shall each bear corresponding responsibilities. If the law provides otherwise, such provisions shall prevail.

04Mankiw’s lawyer suggested that

Although the Civil Code The rights nature of virtual assets is affirmed, but relevant policies still maintain a cautious attitude towards virtual currencies and prohibit the trading of virtual currencies and derivatives. Based on the provisions of laws and policies, Lawyer Mankiw reminds:

1. The risks of virtual currency investment are huge. If you lack understanding of virtual currency investment, you should be cautious when investing in virtual currency.

2. Friends who are ready to invest in virtual currency should first understand the situation of virtual currency as deeply as possible and make some necessary preparations. If you plan to entrust others to invest, you must carefully consider the qualifications, abilities and character of the trustee.

3. Any possible risks encountered during the investment process must be dealt with in a timely manner. If you encounter problems that are difficult to solve by yourself, communicate with professional lawyers in a timely manner to avoid asset losses.