The world of Web3 and cryptocurrency continues to attract new investors seeking financial opportunities. However, with rising interest comes increased risk—especially when individuals entrust their funds to friends, acquaintances, or so-called experts for investment management. What happens when the investment goes south? Can you legally recover your losses?
Drawing from real judicial cases in Zhejiang Province, this article explores the legal landscape surrounding entrusted cryptocurrency investments in China. We’ll analyze court rulings, clarify the boundaries of legal protection, and offer practical insights for those navigating this complex terrain.
The Legal Status of Cryptocurrency in China
Before diving into specific cases, it's essential to understand the regulatory backdrop. In September 2017, the People’s Bank of China and six other regulatory bodies issued the "Announcement on Preventing Risks Associated with Token Issuance and Financing." This landmark document clarified that:
- Virtual currencies like Bitcoin are not legal tender.
- They lack sovereign backing, legal repayment capacity, and mandatory circulation.
- While individuals may engage in cryptocurrency transactions at their own risk, such activities are not protected by law.
This principle was reinforced in 2021 by the "Notice on Further Preventing and Containing Cryptocurrency Trading Speculation," which declared that civil acts involving virtual currency transactions violating public order and good customs are legally invalid.
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This means: if you invest in cryptocurrency and lose money due to market volatility or platform failure, you generally cannot seek legal compensation—even if someone else managed your funds.
But there are exceptions. Let’s examine three real cases that reveal the nuances.
Case 1: Friend Loses Your Investment – Can You Claim Compensation?
Case Reference: (2023) Zhe 0481 Min Chu No. 3094
Background
Mr. Xing entrusted RMB 10,000 to his friend Mr. Shen to invest in virtual currency. Mr. Shen had confidently claimed the investment was “guaranteed profit with no loss.” After a trading error led to total capital loss, Mr. Shen admitted fault in a WeChat message:
"About 70% of the loss was due to my wrong decision. Let me think about how to compensate you."
Despite promising partial reimbursement, Mr. Shen failed to pay. Mr. Xing sued for RMB 7,000.
Court Ruling
The court rejected all claims.
Key Reasoning
Although Mr. Shen acknowledged responsibility, the court emphasized that:
- Investing in virtual currency is an unprotected civil act under Chinese law.
- The nature of cryptocurrency is that of a virtual commodity, not legal currency.
- Risks arising from such investments must be borne entirely by the investor.
Even with proof of negligence or promises of compensation, courts will not enforce liability when the underlying activity is legally unregulated.
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Case 2: Partial Delivery of Virtual Currency – Can You Recover Funds?
Case Reference: (2019) Zhe 0726 Min Chu No. 2357
Background
Mr. Ying paid RMB 13,000 to Mr. Zhu to purchase 10,000 IBOT coins at RMB 1.3 per coin via the now-defunct Kaisa Network. However, Mr. Zhu only delivered approximately 9,000 coins.
When the platform shut down and Mr. Ying couldn’t retrieve his assets, he filed a lawsuit demanding full refund.
Court Ruling
The court ordered Mr. Zhu to return RMB 1,300—equivalent to the undelivered portion.
Key Reasoning
While crypto investment itself is unprotected, the court recognized a valid contractual obligation regarding delivery performance:
- Mr. Zhu failed to prove he used all funds for purchasing coins.
- The undelivered 1,000 coins represented an unfulfilled duty.
- This created a natural debt—an obligation outside formal legal protection but still subject to fairness principles.
Thus, Mr. Zhu had to return the proportionate amount plus interest for the undelivered goods.
Think of it like buying a rare in-game item in an online RPG: if you pay for it but don’t receive it, you can demand a refund—even though virtual items aren’t “real” property.
Case 3: High-Value Investment Gone Wrong – Is Any Recovery Possible?
Case Reference: (2022) Zhe 0182 Min Chu No. 2506
Background
Ms. Ye invested RMB 669,390 in a digital token called VRT through Mr. Jin, who promoted it as a high-return product tradable for Bitcoin or USDT on exchanges. After registering an account on VRBank at Mr. Jin’s direction, she transferred funds over time.
By December 2019, the app became inaccessible. Ms. Ye demanded a full refund; Mr. Jin refused.
Court Ruling
The court ruled Mr. Jin must return 50% of the investment—RMB 334,695.
Key Reasoning
Although both parties engaged in an illegal transaction, the court applied the principle of shared fault:
- Mr. Jin actively promoted and facilitated the purchase despite knowing the risks.
- Ms. Ye voluntarily participated but relied heavily on Mr. Jin’s guidance.
- Given the large sum involved, fairness required shared responsibility.
This case illustrates judicial discretion in balancing equity and legality—even in unregulated domains.
Frequently Asked Questions (FAQ)
Q1: Is buying cryptocurrency illegal in China?
No, owning or purchasing cryptocurrency is not criminalized. However, related financial activities—including trading, fundraising, and payment services—are banned. Such actions are considered illegal and unprotected by law.
Q2: If I lose money investing in crypto, can I sue the person who advised me?
Generally, no—if the loss stems from market risks or platform failures. Courts typically dismiss claims because the investment itself lacks legal protection. However, if the advisor misappropriated funds or failed to fulfill delivery duties, partial recovery may be possible.
Q3: Can I get my money back if someone promised guaranteed returns?
Promises of guaranteed profits do not override legal restrictions. Even if someone misled you verbally or in writing, courts often rule that investors assume all risks in unregulated markets.
Q4: Does the court recognize cryptocurrency as property?
Yes—courts increasingly treat virtual currencies as virtual commodities with economic value. Transactions involving them may form enforceable contracts—especially when one party fails to deliver goods or misuses funds.
Q5: What should I do before entrusting crypto investments to others?
Always:
- Understand local regulations.
- Avoid promises of guaranteed returns.
- Document all transactions and agreements.
- Be aware that even written contracts may not be enforceable in court.
Q6: Are there safe ways to invest in crypto legally?
While direct domestic trading is restricted in China, many use compliant offshore platforms to manage digital assets within regulatory frameworks. Due diligence is crucial.
Key Takeaways
From these cases, several core lessons emerge:
- Cryptocurrency investments are high-risk and legally unprotected in China.
- Market losses cannot be recovered, even with proof of negligence.
- Partial refunds may be awarded if the agent fails to deliver agreed-upon assets.
- Judges may apply fairness principles in extreme cases involving large sums.
- Virtual currency is treated as a commodity, enabling some contractual claims.
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Final Thoughts
While blockchain technology opens new frontiers for finance and ownership, investors must remain cautious—especially when delegating control of their assets. Trust matters, but so does legal reality.
In jurisdictions like China, where crypto-related financial activities operate in a gray zone, personal accountability is paramount. Always assess risks thoroughly, avoid emotional decisions based on promises of quick wealth, and remember: if it’s too good to be true, it probably isn’t protected by law.
Whether you're exploring decentralized finance or simply managing digital collectibles, informed choices today can prevent costly disputes tomorrow.