Web3 Law Popularization | What should I do if my cryptocurrency exchange account is frozen?

Authors: Lawyer Liu Honglin and lawyer Liu Zhengyao

The so-called blessing is not a single line, and the leeks are specially found to be tender.

For friends in the cryptocurrency circle, in addition to the easy freezing of bank cards for selling virtual currency, more and more friends have also encountered something more uncomfortable, that is, your virtual currency exchange account is frozen.

Previously, a friend in the cryptocurrency circle forwarded an article to me, which roughly stated that the account of a virtual currency crypto fund in the United States was frozen on a well-known exchange in China because the account received the virtual currency assets involved in the case. After contacting the public security in mainland China, the fund provided proof of work and account transaction records, but the police still did not apply to unblock its exchange account. The author of the article said that he did not know about the gambling website involved in the case, and his transactions were just routine operations carried out on other virtual currency exchanges. He provided proof to the police, but the police did not unfreeze his account, believing that he might be suspected of violating the law.

Many friends are very strange, I can understand that you say that China’s bank cards are frozen, after all, they are all in mainland China. But the virtual currency exchange I play is registered overseas, how can the Chinese public security still manage it? In this article, we will talk about this topic.

Can the Chinese police freeze accounts on overseas exchanges?

Let’s start with the traffic-saving version: Not only is it possible, but virtual exchanges are generally very cooperative.

We took the industry’s leading name Mou’an as an example, and even provided an exclusive link for China’s law enforcement agencies on its official website to fully assist the smooth development of law enforcement in mainland China. Not only that, it is rumored that a virtual currency exchange has also set up a special law enforcement docking channel with the public security in many places in China to communicate with each other, which is also very exciting to think about (grapevine, the truth is unknown. ）

In accordance with the provisions of Article 144, Paragraph 1 of the Criminal Procedure Law, public security organs may, as necessary for the investigation of crimes, inquire into and freeze the criminal suspect’s deposits, remittances, bonds, stocks, fund shares and other assets in accordance with the provisions. Relevant units and individuals shall cooperate. Therefore, in the process of handling cases, the public security organs will seal and freeze the accounts involved in the case, and these accounts often belong to the channel of new types of illegal crimes in telecommunications networks, and often involve crimes such as aiding trust, money laundering, and covering up and concealing criminal proceeds.

If the public security organ has evidence to prove that the user’s virtual currency account is related to criminal activities, such as suspected money laundering, fraud, gambling, pyramid schemes, etc., then the public security organ has the right to take compulsory measures against the user, so as to facilitate the ascertainment of facts and the collection of evidence. If the user’s virtual currency account is not related to criminal activities, then the public security authorities have no right to take coercive measures against it, otherwise it constitutes an abuse of power and infringement of property rights. Of course, in this case, the user is also obliged to cooperate with the investigation of the public security organ and provide relevant supporting materials.

Can the public security directly transfer the assets involved in the case?

(1) Traditional property involved in the case

According to Chinese law, the public security organs may take measures such as sealing, seizing, or freezing the property involved in a criminal case, but in principle, the property involved in a criminal case cannot be directly seized by the public security organs, and the court will directly dispose of the property involved in the case directly after the court has made a judgment, or the court will entrust the public security organ to carry out the subsequent disposal of the property involved in the case.

However, there are some exceptions in reality: in cases of telecommunications network crimes, the public security organs can directly deduct and return the victim’s funds from the property involved in the case, provided that certain conditions are met. For example, according to the Ministry of Public Security’s “Several Provisions on Printing and Distributing the Return of Frozen Funds in Cases of New Types of Violations and Crimes in Telecommunications Networks”, if the three conditions are met, the public security organs can directly deduct and return the funds involved in the case. When the source is traced directly and in full according to the timestamp, and when the source cannot be traced, it will be returned in proportion to the amount of the victim’s loss and the total amount involved in the case.

(2) Virtual property involved in the case

How virtual currency, as the property involved in the case, should be returned to the victim, and the operation methods of the judicial organs are not completely consistent. Although there are some relevant regulations and notices on the supervision of virtual currencies in China, such as the Notice on Preventing BTC Risks and the Announcement on Preventing Risks of Token Issuance and Financing issued by the Chinese People’s Bank of China and other departments, as well as the recent Notice on Further Preventing and Dealing with the Risks of Speculation in Virtual Currency Transactions issued by ten ministries and commissions, including the “Two Supreme People’s Courts and One Ministry”, these documents do not specifically stipulate the procedures and judicial disposal methods for the sealing, seizure or freezing of virtual currencies by the public security organs. Therefore, it is inevitable that some controversies and disputes will arise in practice.

In addition to regulatory provisions, at the technical operation level, it is also difficult for the public security organs to seal, seize, freeze, and deduct the virtual currency involved in the case. Because virtual currency has no physical form, it only exists in a blockchain network and is controlled by a string of passwords and keys. If the public security authorities want to deduct the user’s virtual currency, they need to first obtain the user’s account information and password on the exchange, and require the exchange to cooperate in providing relevant evidence and assisting in enforcement. However, the exchange may refuse or resist the request of the police because they also want to protect the privacy and interests of users.

At present, in practice, criminal suspects who have been subjected to compulsory measures (criminal detention, residential surveillance at a designated location, etc.) will often take the initiative to cooperate with the public security organs in handling the virtual assets involved in the case, such as transferring the virtual currency in their possession to the address of the virtual currency account created by the public security. For simple cases, for example, under the conditions of cybercrime, A stole a BTC of B, and after B reported the case, the public security arrested A, and asked A to transfer the BTC of the stolen proceeds to the wallet address created by the public security, and after confirming that B was the victim, the public security could directly transfer one of the BTC involved in the case to B.

Of course, in reality, criminal cases are often more complex, with a large number of victims and even a large number of criminal suspects, at this time it is difficult to directly deduct virtual currency, but it is still possible to seal and freeze, and the seizure operation is generally to transfer the virtual currency involved in the case from the suspect’s account to the virtual currency wallet account of the public security.

How can citizens protect their interests?

According to article 145 of the Criminal Procedure Law, if it is found that the sealed or seized property, documents, mail, telegrams, or frozen deposits, remittances, bonds, stocks, fund shares, and other property are truly unrelated to the case, the sealing, seizure, or freezing shall be lifted within three days and returned.

If a citizen’s exchange account is frozen, he or she can take the initiative to submit the corresponding proof of assets and legal documents to prove that the investment behavior is an individual act and that the source of funds is legal, and apply to the public security organ for lifting the compulsory measures, and if the public security organ refuses to lift or does not reply, he can appeal to the people’s procuratorate. If the people’s procuratorate also does not support or does not reply, it may file an administrative lawsuit with the people’s court. Of course, in this process, you can also choose to entrust a lawyer to assist.

Summary

Based on the need to crack down on illegal crimes, China’s public security has the right to freeze citizens’ bank accounts or exchange accounts in accordance with the law. In addition to passively waiting for the public security to deal with it, investors can also take the initiative to contact the public security and provide relevant supporting materials to strive to unfreeze the account as soon as possible.

Of course, the above sharing is an afterthought, the so-called medical treatment, for friends in the currency circle, if you have a large amount of legal digital assets, it may be a more recommended choice to put them in a truly decentralized wallet.