Web3 Project Criminal Complaint in China: A Comprehensive Guide

Criminal Litigation for Web3 Projects in China: A Detailed Guide

As a legal consultant specializing in the fintech space, I often encounter questions about how to navigate the intricate legal landscape faced by Web3 projects in China. One crucial aspect is filing a criminal complaint. This process is fraught with challenges, particularly due to the unique nature of Web3 businesses and the Chinese regulatory framework.

Key Considerations Before Initiating a Complaint

• Perpetrator's Presence in China: This is a fundamental requirement. If the perpetrator is in Hong Kong or overseas, action is unlikely, even if the police initiate an investigation.
• Required Documentation: Gathering all relevant supporting documentation is crucial.
• Jurisdiction: Determining the appropriate police authority to file the complaint to avoid rejection due to lack of jurisdiction.
• Reverse Risk: Assessing whether filing a complaint could inadvertently trigger an investigation against your own project.
• Eligibility as a "Victim Unit": Understanding who can file the complaint on behalf of the Web3 project.

Who Can File? The Role of the “Victim Unit”

For Web3 projects, identifying the “victim unit” becomes critical, especially in cases of embezzlement, fraud, or theft. This depends on whether the Web3 project has a physical entity registered in China.

Scenario 1: No Chinese Entity

Web3 projects are often registered offshore (Hong Kong, Singapore, Cayman Islands, etc.) but employ staff in China. These staff may be contracted through third-party agencies. Can a third-party agency file a complaint as the “victim unit”? Most likely not, as they are typically not involved in fund management or have direct rights to the assets in question.

Scenario 2: Chinese Entity Exists

If a Web3 project has a registered company in China, that company may file a complaint jointly with the offshore entity, similar to how courts handle foreign companies with branches or subsidiaries in China.

Challenges in Establishing Victim Status

Determining whether a Web3 platform itself can be considered a “victim unit” presents a unique challenge. In China, cryptocurrency-related activities are subject to intense regulatory scrutiny. Courts determine whether the platform has “legitimate rights and interests” based on:

• Legal Compliance: Is the platform operating legally in China?
• Prohibited Activities: Is the platform engaged in activities prohibited under Chinese law?

If the platform's core business activities are prohibited in China, establishing victim status may be difficult. However, if the activity is not explicitly prohibited and there is evidence of material damage, the platform may be recognized as a victim.

Assessing Reverse Risks

Filing a criminal complaint raises concerns about whether it will attract unwanted attention to the project's legitimacy. As China deems cryptocurrency activities illegal, it’s crucial to assess whether filing could jeopardize the project. However, illegal financial activities do not automatically equate to criminal offenses. Risk assessment often hinges on whether the project targets Chinese users or gathers funds from Chinese sources.

It’s important to note that some may exploit a project's concerns about domestic risks to extort them. However, as recent reports illustrate, not every Web3 project is left to fend for itself. By understanding their rights and pre-assessing legal risks, projects can seek legal recourse.

Jurisdiction: Where to Go to File a Complaint?

Determining the appropriate police authority is crucial. Filing with the wrong authority can lead to rejection, delays, or even subsequent legal challenges. Under Chinese law, criminal jurisdiction follows the principle of “place of the crime” with exceptions based on the defendant’s residency. In Web3 scenarios, the “place of the crime” encompasses any location where:

• Funds or digital assets are transferred or controlled
• Private keys or account permissions are manipulated
• Asset losses occur
• Proceeds of the crime are obtained, concealed, or used

For crimes like theft or fraud, file a complaint with the criminal investigation department of the police in the place where the theft or fraud occurred, or where the funds (cryptocurrencies) were transferred or received. For crimes like bribery, embezzlement, or misappropriation, if the Web3 project has a branch in China, file a complaint with the economic investigation department of the police at the branch location. If there’s no branch, file a complaint with the economic investigation department in the actual place of the crime or the suspect's place of residence.

Offshore Evidence and On-Chain Evidence: Notarization and Authentication

Operations, account systems, asset management, and collaboration in Web3 projects often occur on offshore servers, on-chain systems, or international communication tools. Therefore, notarization and authentication of this evidence may be necessary in China.

Under the Criminal Procedure Law, if a Web3 project gathers information about the facts related to the case, including the authorization papers of agents (such as employees or lawyers), it must be notarized and authenticated, and a Chinese translation must be attached if it involves a foreign language.

In conclusion, filing a criminal complaint for a Web3 project in China requires careful consideration of several factors, including jurisdiction, eligibility as a victim, evidence, and notarization requirements. By systematically addressing these issues, Web3 projects can increase their chances of seeking justice and protecting their interests in the complex Chinese market.