Are there risks for Web3 remote work in China? (Part 1)
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Are there risks for Web3 remote work in China? (Part 1)
Focusing on personal safety, this article discusses the risks of Web3 workers being arrested in China.
Navigating Web3 tides with focused insightsAuthor: Manqin Blockchain Legal Services
Introduction
Opportunities and legal risks often coexist. Web3 workers may encounter overseas companies suddenly going offline, or they might be imprisoned for being deemed involved in pyramid schemes or fraud through their work content... Due to the appealing nature of the Web3 industry and increasingly strict regulations in China, there has been a continuous emergence of individuals entering high-risk projects due to unclear understanding of legal boundaries.
The Manqin criminal defense team has provided onboarding analysis consultations for many practitioners and represented numerous similar criminal cases, understanding that job seekers are most concerned about financial risk and personal safety. This article will focus on personal safety, discussing the risks of Web3 workers being arrested domestically, analyzing characteristics of high criminal-risk projects, and helping people improve judgment, identify red flags, avoid pitfalls, and reduce risks.
Risk of Operating Gambling Activities
"Operating gambling activities" is the most common, most concealed, and highest-risk category of criminal charges. In current judicial cases, project members and developers have already been recognized as accomplices to the crime of operating gambling platforms due to involvement in related businesses. We summarize the following four common high-risk scenarios:
1. Directly establishing a gambling platform on-chain
Xie and Liu's team built the "BigGame" platform on the EOS blockchain, offering games such as "dice rolling" and "red-black battle," allowing users to bet using EOS coins (cryptocurrency) as chips. EOS coins could be exchanged for fiat currency via relevant trading platforms, forming a complete cryptocurrency-to-fiat conversion chain.[1]
2. Using cryptocurrency as chips on traditional gambling platforms
Li's team established the "IFA" anti-odds betting gambling platform online, supporting users to gamble by depositing RMB or cryptocurrencies. Team members used computers and mobile phones to collect real-time football match scores and odds data from gambling websites like "Leisu" and "Taojin," edited them, and uploaded them to the platform backend for members to place bets. Users profited through betting, essentially engaging in "high-risk gambling"; meanwhile, winnings could be converted into fiat currency via exchanges, forming a complete conversion chain.[2]
3. Building fake cryptocurrency trading platforms with no real transactions, only guessing price movements
He's team attracted players to participate in gambling activities on the "StarCoin Global" platform by sending advertisements including profit screenshots and website links via the internet and mobile communication devices. Participants had to use USDT cryptocurrency to bet on the price fluctuations of other cryptocurrencies; the uncertain trend of cryptocurrency prices, combined with the platform’s 50x leverage trading feature, further amplified the "high-risk gambling" nature; USDT was pegged 1:1 to the U.S. dollar and could be exchanged for fiat currency via platforms like Huobi, enabling players' earned USDT to be cashed out through this channel. The platform profited by charging a 0.2% fee on players' bets.[3]
4. Providing exchange services for gambling websites
Su provided bank cards to recharge and launder funds for online gamblers, serving as a key link in the gambling funds' conversion chain. Gamblers transferred RMB to Su via bank transfers, who then purchased USDT at market price on Huobi, deposited it into the "Laida" platform account, clicked "confirm release of coins," allowing gamblers to receive chips on corresponding gambling platforms; the gambling platforms he served all featured random gameplay; the "Laida" platform interoperated with overseas gambling platforms in USDT, enabling reverse operations to convert chips back into USDT and then into fiat currency for cashing out.[4]
Article 8 of the "Interpretation on Several Issues Concerning the Specific Application of Law in Handling Criminal Cases of Gambling" defines gambling behavior: users invest a certain amount of fiat currency; through specific activities/games, ultimately obtain more or less money or redeemable equivalents; forming a money-to-money chain.
From the above cases, it can be seen that cryptocurrency or blockchain is often embedded into key aspects of gambling activities: first, used as chips directly replacing fiat currency in betting; second, serving as a settlement tool providing cross-border, anonymous fund transfer paths for gambling funds; third, achieving free conversion with fiat currency via exchanges, completing a closed loop of fund monetization. Therefore, although these activities appear superficially as "blockchain applications" or "virtual asset games," their operational logic still satisfies the three elements of gambling crimes—users investing monetary value, relying on randomness to gain profits, and forming a complete money-to-money chain.
It should be noted that in judicial practice, not only are those building or operating gambling platforms recognized as running gambling operations, but individuals providing direct or indirect assistance such as agency, promotional marketing, fund settlement, and technical support for such platforms may also be deemed accomplices or accessories. For Web3 practitioners, whether developers, marketers, or those handling settlements and community operations, it is essential to scrutinize whether projects involve gambling elements when engaging with them, avoiding unintentional entanglement in criminal risks.
Risk of Organizing Pyramid Schemes
In judicial practice, Web3 projects triggering legal risks related to pyramid schemes mainly exhibit three characteristics, exemplified by the PlusToken case5:
1. New payment forms: Requiring participation fees paid in cryptocurrencies;
2. Multilevel promotion models: Utilizing smart contracts for multilevel commissions, cross-chain platforms for multilevel promotions, task-based new-user referrals with multilevel rebates, etc.;
3. Multitiered compensation: Commission structures based on transaction fees, multilevel profit-sharing, tiered dividends among community members, etc.
For detailed analysis of this case, our lawyer Shao Shiwei has previously written an article titled Case Interpretation: How Web3 Games Can Avoid Pyramid Scheme Risks from a 40 Billion CNY Crypto Pyramid Case?.
According to the definition of pyramid schemes in the "Regulations on Prohibiting Pyramid Selling" and the "State Administration for Market Regulation's Risk Alert Notice on New Types of Pyramid Selling Activities," a pyramid scheme refers to an illegal business operation where organizers or operators develop personnel, calculate or pay remuneration based on the number of recruits, or require recruits to pay fees to obtain membership qualifications.
1. Paying fees: Paying or indirectly paying entry fees, membership fees, or purchasing virtual or physical products, after which one gains eligibility to earn commissions and recruit subordinates;
2. Developing subordinates: Directly or indirectly recruiting others, i.e., bringing in new members, forming hierarchical levels in a certain order. Article 1 of the "Opinion on Several Issues Concerning the Application of Law in Handling Criminal Cases of Organizing and Leading Pyramid Scheme Activities" clarifies the threshold: more than three levels and over 30 recruits constitute a crime;
3. Hierarchical compensation: Superiors earning commissions from sales performance of directly or indirectly recruited subordinates, or receiving rewards/returns based on the number of directly or indirectly recruited individuals, with clearly tiered income distribution.
Combining the PlusToken case and judicial interpretations highlighting three features, although pyramid schemes in Web3 contexts are more concealed, they still possess the three characteristics of paying fees, developing subordinates, and hierarchical compensation. Cryptocurrencies may serve both as a payment method for entry fees and as a promotional lure to attract participants, eventually acting as a reward mechanism. Once these three features are met along with the legal thresholds for hierarchy and number of people, it may be认定 as a pyramid scheme.
Therefore, if you are an employee of a project team and knowingly or ought to know that the project possesses the above features, yet deeply participate in areas such as promotional design, fund collection and distribution, or subordinate recruitment, you may bear criminal responsibility.
Risk of Illegal Fundraising
In practice, directly or indirectly raising startup capital has gradually become a primary method for launching blockchain projects. Launching projects through fundraising often requires extensive promotion, and many people unaware of legal boundaries engage in high-risk behaviors such as exaggerating returns, promoting "never falling prices," "guaranteed profits," "principal protection," etc., which often lead to being认定 as illegal fundraising.
Taking the "Shenyang Maker" case6 as an example, Huo established Shenyang Maker Era Big Data Asset Management Center without possessing the required qualifications, promoting three projects to over 400 people with promises of high returns, illegally raising more than 60 million RMB. The projects included: ① Bitcoin mining machine sales and lease-back program, where customers invested in mining machines purchased by Shenyang Maker, which paid investors 230 RMB daily for a 15-month contract period, after which the mining machines belonged to Shenyang Maker without returning the 20,000 RMB purchase cost. ② Gravity-Free ICO fund investment project. ③ Blockchain investment project promising 20–30 times returns.
According to the "Regulations on Preventing and Dealing with Illegal Fundraising" and the aforementioned "Interpretation," illegal absorption of public deposits refers to activities that absorb funds from unspecified members of society without legal permission from financial regulators under the State Council or in violation of national financial management regulations, issue vouchers, and promise repayment of principal and interest within a certain period.
Additionally, according to Item 8 of Article 2 of the "Supreme People's Court Interpretation on Several Issues Concerning the Specific Application of Law in Handling Criminal Cases of Illegal Fundraising," activities involving virtual currency transactions are explicitly included within the scope of regulating the crime of illegal absorption of public deposits. Combining statutory provisions and Web3 project cases, although high-risk projects differ in promotional methods, they essentially still exaggerate profits to unspecified majorities, thereby conducting illegal fundraising.
Thus, projects simultaneously meeting the following four characteristics carry extremely high risks of涉嫌illegal fundraising and should be approached with caution:
1. Illegality: Without legal permission from financial regulators under the State Council or in violation of national financial management regulations;
2. Publicity: Promoted through public channels such as the internet, television, or on-site events;
3. Social nature: Absorbing funds from the general public, i.e., unspecified social objects;
4. Inducement: Promising high returns, advertising that the token only rises and never falls, stable annualized yields, returning principal-equivalent tokens within a certain period, compounding return promises, stable dividend incomes, etc.
Combined insights from the "Shenyang Maker" case and the above judicial interpretations show that illegal fundraising in Web3 scenarios takes diverse forms, including mining machine buyback schemes, token issuance, on-chain wealth management, and various other models promoted publicly to raise funds. However, the core still exhibits the four characteristics of illegality, publicity, social nature, and inducement. Once a project meets these criteria, it may be认定as illegal fundraising. Moreover, if you are a project employee who knowingly or ought to know that the project possesses these features and deeply participates in model design, promotional outreach, fund raising, and distribution, you may similarly bear criminal responsibility.
Risk of Fraud
In practice, fraud tactics vary widely, but their core characteristic remains the purpose of "illegal possession" defined in Article 266 of the "Criminal Law of the People's Republic of China" and related judicial interpretations, causing victims' property losses through fabrication or concealment.
In the "Xiong's fraud case7," the involved team recruited domestic personnel under the guise of setting up a company, using communication tools and internet technologies. Employees impersonated roles such as "instructors," "assistants," and "experienced stock investors" to deceive victims into investing in fake "cryptocurrencies" offered by the company. Initially, small profits were created to build trust, then victims were encouraged to make large investments. By manipulating the backend to cause sharp declines in the fake digital currencies, false loss appearances were created, leading victims to believe their investments failed, thus obtaining their money. Regarding the "Xiong's fraud" case, specific manifestations of fraud in blockchain projects include the following situations.
1. Fabricating facts/concealing truth: Creating false profit models during project preparation;
2. Intent of illegal possession: After fundraising, failing to develop the project as stated in the whitepaper, instead recklessly spending funds or absconding with the money;
3. Victims dispose of property based on cognitive errors: After issuing tokens, maliciously manipulating token prices to create illusions, causing victims to dispose of their property based on false impressions, enabling perpetrators to seize victims' funds.
Furthermore, providing payment settlement assistance knowing others are committing telecommunications network fraud may also be认定as an accomplice to fraud in practice. In the "Xie's fraud case8," Xie assisted others in committing telecom fraud. To evade investigation, he collaborated with others to transfer illicit proceeds via bank transfers to other individuals’ Alipay, WeChat, and bank accounts, then used these funds to purchase "Tether" and other cryptocurrencies. Others transferred the cryptocurrencies via online accounts to Xie, who sold them for cash and delivered the funds to the fraudsters, earning commissions in the process.
Therefore, before joining a project, it is not only necessary to carefully evaluate the project party,but also to尽可能understand the upstream business of the settlement party; otherwise, employees involved may unavoidably bear significant criminal risks.
Recommendations from Manqin Criminal Defense Team
Overall, regarding whether working in Web3 involves criminal risks, one must first assess the inherent risks of the project itself. This requires combining actual job responsibilities to preliminarily screen risky projects, identifying and avoiding participation in high-risk operations exhibiting the following characteristics.
1. Risk of operating gambling activities: If a project follows the model of "paid investment + random gameplay + monetization chain," extreme caution is warranted.
2. Risk of organizing pyramid schemes: When a project requires employees to "pay fees + recruit subordinates + hierarchical compensation," it essentially constitutes pyramid scheme characteristics.
3. Risk of illegal absorption of public deposits: If a project meets the four conditions of "illegality + publicity + targeting unspecified individuals + promising principal protection and interest payments," it represents a typical case of illegal absorption of public deposits.
4. Risk of fraud: When a project induces users to "wrongfully dispose of a certain amount of property" through "intent of illegal possession + fabricating facts/concealing truth," it涉嫌fraud.
Conclusion
Career choices in the Web3 industry are like a double-edged sword, carrying aspirations for financial freedom while harboring non-negligible potential crises. The content discussed here is for reference only. If you encounter more complex or specific legal issues in your actual work, it is recommended to promptly consult professional lawyers or institutions.
If you still have doubts—for instance, if I'm just an outsourced worker or non-core staff member, not the boss, could I still face criminal liability? If pursued, would I bear primary or secondary responsibility? The next issue will address these concerns.
References
[1] Case No. (2023) Su 09 Xing Zhong 372;
[2] Case No. (2019) Yue 1781 Xing Chu 126;
[3] Case No. (2020) Ji 0622 Xing Chu 73;
[4] Case No. (2024) Gan 1126 Xing Chu 85;
[5] Case No. (2020) Su 09 Xing Zhong 488;
[6] Case No. (2019) Liao 01 Xing Zhong 666;
[7] Case No. (2023) Shan 08 Xing Zhong 332;
[8] Case No. (2021) Qian 2324 Xing Chu 93.
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