On July 1, the People's Procuratorate of Jing'an District, Shanghai disclosed that it had filed a public prosecution against Li and other members of a criminal gang that used virtual currency for cross-border illegal foreign exchange through "mirror trading" on suspicion of illegal business operations. The trial was held on June 10 with a verdict announced in court, marking the end of a series of illegal business cases spanning 3 years with an involved amount exceeding 200 million yuan.
Z Company's Virtual Currency Mirror Trading Structure: No Actual Cross-Border Funds
Z Company was registered overseas in 2019 by the mastermind Zhou, marketed under the guise of a "private bank," and developed a virtual banking app to create a false appearance of legitimacy, but never obtained a Chinese foreign exchange business license. The exchange process: domestic clients purchase virtual currency from virtual currency merchants using RMB, transfer it to Z Company's overseas virtual wallet; Z Company converts the virtual currency into foreign currency overseas and transfers it to the client's designated overseas account.
Throughout the process, no actual funds cross borders; instead, domestic and overseas fund pools settle separately. Z Company charges a 3% service fee for exchanges and pays a 0.5% commission to intermediaries. Z Company targeted high-net-worth clients with overseas property purchase, immigration, and study abroad fund needs, directing traffic through study abroad and immigration intermediaries.
Trial Results: 5 Sentenced, 4 Granted Relative Non-Prosecution
The court issued the following rulings based on each individual's role in the joint crime, the amount involved, and their attitude toward pleading guilty and accepting punishment:
Gao (Domestic Client Manager): Handled illegal exchanges exceeding 170 million yuan during tenure; continued committing crimes while released on bail pending trial, arrested in January 2025
Li (Overseas Client Manager): Handled illegal exchanges exceeding 50 million yuan during tenure; intercepted at the airport in July 2025 while attempting to exit the country
Gao, Li, and five others: Sentenced to fixed-term imprisonment ranging from six years to two years and six months, with fines ranging from 1.5 million yuan to 300,000 yuan
Chen, Huang, and four others: Due to minor criminal circumstances and voluntary guilty pleas and acceptance of punishment, granted relative non-prosecution in accordance with the law
Reverse Connection Between Administrative and Criminal Penalties: Non-Prosecution Does Not Mean No Accountability
After the verdict, the Jing'an District Procuratorate immediately initiated the "reverse connection between administrative and criminal penalties" mechanism, transferring the leads to the administrative prosecution department and recommending that an opinion letter be sent to the Shanghai Branch of the State Administration of Foreign Exchange (SAFE) to suggest administrative penalties for Chen and others. Currently, the Shanghai Branch of SAFE has formally filed a case against Chen for investigation, forming a closed-loop for cross-border financial governance through "criminal accountability + administrative sanctions."
Frequently Asked Questions
What technical differences exist between virtual currency "mirror trading" for foreign exchange and traditional underground banks?
Traditional underground banks achieve exchanges through manual coordination of simultaneous domestic and overseas fund operations; virtual currency mirror trading uses virtual currency as an intermediary, leveraging its anonymous transactions and trace-free on-chain flow characteristics to sever the direct connection between domestic and overseas funds. Superficially, no funds truly cross borders, but the essence remains illegal foreign exchange trading, and serious cases will be pursued as criminal offenses for illegal business operations.
If someone lends their bank card to assist in foreign exchange exchanges, can they face criminal liability?
In this case, Li's boyfriend was transferred to public security authorities for lending his bank card to consolidate over 8 million yuan in domestic funds. According to the case explanation by the Jing'an District Procuratorate, lending a bank card to assist others in receiving and transferring "exchange funds" can lead to account freezes and negative impacts on personal credit at the minimum, and at worst, may result in criminal liability for telecom fraud, money laundering, or aiding information network criminal activities.
What impact will the new regulations effective July 1, 2026, have on individual overseas investments?
The State Council's Provisions on Outbound Investments officially takes effect on July 1, 2026, incorporating individual resident investments, requiring all capital outflows for capital account purposes to be accompanied by complete filing, tax payment, and property rights certificates. The convenience quota of $50,000 per year per domestic resident for purchasing foreign currency remains limited to current account items such as travel and study abroad, and is strictly prohibited for capital account items such as purchasing overseas stocks or real estate.
