Fuzhou Gulou District Court: Using USDT as a foreign exchange intermediary constitutes illegal financial activity; the court dismisses the lawsuit and transfers the case to the police

According to reports released on May 11, the People’s Court of Gulou District, Fuzhou (Gulou Court) has recently concluded a case of a dispute over entrusted financial management. Investor Chen through intermediary Liu injected RMB 480,000 into “foreign-exchange wealth management.” After the funds were converted into USDT (Tether), they were transferred to an overseas trading platform, where Chen ultimately suffered a total loss of principal due to the platform’s closure. The Gulou Court held that the transactions formed a closed loop and constituted illegal financial activity of disguised foreign-exchange trading. The court ruled to dismiss the lawsuit and transferred the relevant materials to the public security authorities for handling.

Case Overview and Transaction Model

According to the case details concluded by the Gulou Court, from October 2023 to April 2024, Chen came to know intermediary Liu through introductions. Liu promised a foreign-exchange wealth management program with “high yields and quick payback.” Chen cumulatively transferred RMB 480,000 to Liu as deposits. After Liu converted the above funds into USDT, he transferred them to an overseas trading platform for foreign-exchange investment. Ultimately, the platform was shut down, and Chen lost all of his principal. During the trial, Liu stated that he had handled deposits and “follow-trading” for dozens of investors, with the amount involved reaching several million yuan.

Court Rulings and Appeal Outcome

According to the ruling of the Gulou Court, this case’s transaction formed a complete closed loop in which RMB and the value of foreign exchange were swapped using USDT as the intermediary. This constitutes disguised foreign-exchange trading that intentionally bypasses supervision of the foreign-exchange market, allegedly disrupting financial order, and possibly causing systemic financial risk and harming the public interest.

The Gulou Court, pursuant to Article 11 of the Supreme People’s Court’s provisions on certain issues regarding economic crime suspicion involved in handling economic dispute cases, ruled to dismiss Chen’s lawsuit and transferred the relevant materials to the public security authorities for handling. Both Chen and Liu were dissatisfied with the court of first instance’s ruling and filed appeals separately. After the Fuzhou Intermediate People’s Court heard the case, it ruled to dismiss the appeals and uphold the original ruling of the Gulou Court.

Relevant Regulatory Legal Provisions

According to the regulatory basis cited by the Gulou Court, a notice jointly issued in multiple departments including the People’s Bank of China—【Yinfa〔2026〕No. 42】—provides that virtual currencies do not have legal status equivalent to that of fiat currency, and related business activities constitute illegal financial activities. Where any unit or individual invests in virtual currencies and related financial products in violation of public order and good morals, the related civil legal acts are invalid, and any losses arising from this shall be borne by the parties themselves. Where there is suspicion of disrupting financial order or endangering financial security, relevant departments shall investigate and handle it according to law.

Common Questions

What is the core legal basis for the Gulou Court of Fuzhou to dismiss the lawsuit?

According to the Gulou Court’s ruling, the transaction in this case formed a complete closed loop for swapping the value of RMB and foreign exchange using USDT as the intermediary, which constitutes disguised foreign-exchange trading. The court, based on Article 11 of the Supreme People’s Court’s provisions on certain issues regarding economic crime suspicion involved in handling economic dispute cases, ruled to dismiss the lawsuit and transfer the matter to the public security authorities for handling.

What was the appeal ruling outcome by the Fuzhou Intermediate People’s Court?

According to public reporting, both Chen and Liu appealed the court of first instance’s ruling. After the Fuzhou Municipal Intermediate People’s Court heard the case, it ruled to dismiss the appeals and uphold the original ruling of the Gulou Court.

What regulatory legal provisions were cited in this case?

According to the case details concluded by the Gulou Court, the notice cited in this case is 【Yinfa〔2026〕No. 42】. The notice was jointly issued by the People’s Bank of China and multiple departments, clarifying that business activities related to virtual currencies constitute illegal financial activities. Civil legal acts that violate public order and good morals are invalid, and losses shall be borne by the parties themselves.