Cryptocurrency Exchange for Forex Conviction: 6 Years! 245 Million Illegal Transactions Fully Exposed

Sichuan Province Leshan Intermediate People’s Court concluded a case involving illegal foreign exchange transactions using virtual currencies, with a involved amount of 245 million yuan. The main perpetrator, Wan Mouyuan, was sentenced to 6 years in prison and fined 740,000 yuan; his wife, Chen Mouwen, received a sentence of 2 years and 6 months; upstream supplier Huang Mouyuan was sentenced to 5 years and 6 months. The court’s first ruling recognized that using virtual currencies such as USDT as a medium to realize RMB and foreign exchange value conversion constitutes a disguised form of foreign exchange trading, and should be prosecuted under the crime of illegal business operations.

Couple Operates $36 Million Underground Currency Exchange Network

From November 2020 to March 2021, Wan Mouyuan and his wife established a sophisticated underground foreign exchange chain. Wan was responsible for front-end client development, seeking companies and individuals with dollar needs through social media and private networks. These clients were typically import-export businesses seeking to evade foreign exchange quotas, wealthy families planning overseas property purchases, or families planning immigration.

The operation mode of the criminal chain was highly covert. After negotiating dollar prices and payment company information with clients, Wan would pass the information to his wife, Chen Mouwen. Chen played a central intermediary role, responsible for fund allocation and risk isolation. She collected RMB from clients used to buy USDT, and transferred these RMB or purchased USDT to upstream supplier Huang Mouyuan. Huang would then transfer corresponding USD from overseas accounts into clients’ designated foreign accounts.

This triangular structure was meticulously designed: Wan did not directly handle funds, Chen did not directly contact clients, and Huang was unaware of the clients’ identities. Each link had certain information barriers, increasing regulatory investigation difficulty. Judicial audits revealed that in less than half a year, Wan and his wife collected a total of 234 million RMB from clients, and purchased a total of 36.01 million USD with RMB and USDT, equivalent to 236 million RMB.

Notably, from February to March 2021, Wan and his wife expanded their operations by purchasing another 1.74 million USD from co-defendant Wang, and collected 11.4 million RMB from clients. This multi-channel supplier strategy demonstrated a trend of scaled criminal operations and reflected the huge demand in the underground foreign exchange market.

Why USDT-Mediated Transactions Constitute Disguised Foreign Exchange Trading

The major legal breakthrough in this case was the court’s first clear determination that virtual currency-mediated transactions constitute “disguised foreign exchange trading.” Traditional black foreign exchange markets often use “counter-trading” models: two accounts, domestic and overseas, transfer funds simultaneously, enabling cross-border fund transfers without actual foreign exchange transaction records. The emergence of virtual currencies has provided a new pathway for such operations.

USDT is a stablecoin pegged to the US dollar, theoretically 1 USDT equals 1 USD. After Chen Mouwen purchased USDT and transferred it to Huang, Huang would exchange USDT for USD overseas or directly pay to clients’ overseas accounts. The entire process involved no direct RMB-USD exchange, but in essence, a value transfer was completed.

The court held that although on the surface it appears as a two-step transaction—RMB to USDT, then USDT to USD—the core is that virtual currencies serve as a medium to realize the exchange of RMB and foreign currency values. This behavior is economically identical to direct “buying and selling foreign exchange,” circumventing national foreign exchange controls and disrupting financial market order.

The key legal principle is “substance over form.” No matter how complex the intermediate steps are, as long as the final result is that clients pay RMB and receive foreign currency, and the transaction occurs outside the designated trading venues, it constitutes illegal foreign exchange trading. The anonymity and decentralization features of virtual currencies cannot be used as an excuse to evade legal regulation.

Legal Basis for Sentencing and Details of the Judgment

According to the “Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Criminal Cases of Fraudulent Foreign Exchange Purchase, Illegal Foreign Exchange Trading,” illegal business operations involving amounts exceeding 25 million yuan or illegal gains over 500,000 yuan are classified as “particularly serious circumstances.” The illegal amounts involved for the three defendants in this case far exceeded this standard.

Analysis of Sentencing Differences Among the Three Defendants

Wan Mouyuan (Main offender, sentenced to 6 years)

· Responsible for client development and price negotiations

· Involved in the entire amount of 245 million yuan

· Fined 740,000 yuan

Huang Mouyuan (Upstream supplier, sentenced to 5 years 6 months)

· Provided overseas USD funding sources

· Involved amount of 236 million yuan

· Fined 710,000 yuan

Chen Mouwen (Accessory, sentenced to 2 years 6 months)

· Assisted her husband in fund transfer

· Recognized as an accessory, receiving a reduced sentence

· Fined 250,000 yuan

It is noteworthy that although Chen Mouwen played a key role in the entire criminal chain, the court determined she was under her husband’s instructions and classified as an accessory, resulting in a significantly lighter sentence than the other two. This reflects the basic principle of distinguishing principal and accessory offenders in criminal law and provides a reference for sentencing similar family-based crimes.

The sentencing difference between Wan and Huang, only six months apart, reflects the court’s detailed assessment of each link’s role in the criminal chain. While Wan did not directly provide USD, his client development and overall operation made him the main offender. Huang provided the funding source, also crucial but relatively passive, thus slightly lighter.

The Regulatory Red Line for Virtual Currencies Is Becoming Clearer

The verdict has important warning significance for the virtual currency industry. In September 2021, the People’s Bank of China and ten other departments issued the “Notice on Further Preventing and Disposing of Risks of Virtual Currency Trading and Speculation,” explicitly stating that virtual currency-related activities are illegal financial activities. This case’s judgment further clarifies from judicial practice that virtual currencies cannot be tools to evade foreign exchange controls.

Currently, virtual currencies still have gray areas in cross-border payments and asset allocation. Some investors mistakenly believe that using virtual currencies to realize asset outbound is a “technological innovation,” but in reality, it violates criminal law. This case clearly defines the red line: any foreign exchange and RMB value exchange conducted for profit outside the prescribed trading venues, regardless of technical means or intermediaries, constitutes illegal business operations.

Investors should conduct foreign exchange transactions through legitimate channels, avoid participating in underground banks for profit, and retain complete transaction documentation if they have legitimate foreign exchange needs through banks or financial institutions. For virtual currency exchange services claiming to “bypass foreign exchange controls,” increased vigilance is required.