Three cases understood: Why are cases involving cryptocurrencies stuck at the "civil remedy stage"?

Introduction: The Risks of Cryptocurrency-Related Cases Are Concentrating in the “Remedy Stage”

When handling cryptocurrency-related cases, you will repeatedly encounter a very typical client emotion:

“I know I was scammed, the money was indeed transferred out, I can see it on the blockchain, so why is no one intervening, and why can’t I recover it?”

The problem often isn’t at the factual level but at the procedural level—

The clearer the facts, the easier it is for clients to mistakenly believe that “remedies can be initiated”; but in cryptocurrency cases, whether remedies can be initiated depends first on three things: characterization, jurisdiction, and whether evidence can be concretely established.

In recent years, the forms of cryptocurrency disputes have also changed:

Initially, more cases involved “theft of coins and fleeing”; now, many look quite formal (listing services, U商 exchanges, NFT investment platforms), but asset paths are more complex, entities more dispersed, and cross-border transactions more normal. Therefore, when cases reach the “remedy stage,” they often encounter three common barriers:

• Assets have value, but their nature and transaction relationships are not easily quickly characterized: Are they property, contractual objects, investment rights, or tools involved in criminal chains?
• Cross-border and multi-entity structures make jurisdiction and evidence collection difficult: the blockchain is here, the trading platform is there, servers are overseas, and people have fled?
• Civil and criminal laws are intertwined: Once suspected of criminal involvement, civil proceedings can be easily blocked or transferred, and the pace of remedies is entirely out of the client’s control.

Below, using three typical cases, I will clarify why these blocks occur and what lawyers can do.

Case Studies Review

Case 1: Cross-border “Listing Service Fee” Scam

A company from H country plans to list a token on an exchange in S country, coordinating with a Chinese national employee of the exchange. They agree to pay 80 million USDT as a listing service fee.

After payment, the employee goes silent, and the exchange states he has resigned, and the service fee was not received.

Key Obstacles in Case Progression

• The case involves obvious cross-border factors, making civil remedies difficult to initiate directly; procedural priority principles require first resolving whether to file a case criminally.
• The cross-border transfer of crypto assets makes evidence collection and jurisdiction challenging—wallet transaction records are spread across different chains, and exchange servers are overseas.
• There are differing opinions on the nature of the behavior: is it criminal fraud, civil breach of contract, or part of a criminal chain? This directly determines which procedural path the case takes and whether remedies can be initiated.

What can lawyers do?

First, don’t rush to write the “scam process”; instead, map out “how the money moved”: transfer links, wallet addresses, timeline, counterpart’s identity materials, communication records, exchange feedback.

Simultaneously prepare two sets of language:

For criminal: emphasize territorial/subject jurisdiction, highlight key facts like “intent to illegally possess” (inducement, fictitious identity/authority, service promises, non-performance, disappearance, etc.).

For civil: condense disputes into “service fee paid—service not performed—opponent’s possession without basis,” creating a foundation for subsequent negotiations or asset preservation.

Don’t treat “exchange reply” as the conclusion—treat it as an entry point for evidence: it’s common for exchanges not to acknowledge, but lawyers should turn this into clues about “internal management, authority, and business relationships.”

Case 2: USDT Exchange Scam

An investor, after meeting an “investment advisor” online, is recommended to exchange USDT via U商. The investor transfers over three million yuan to multiple accounts, but the funds never arrive. Later, U商 is arrested, but it only provides exchange services and has no direct connection to the upstream scam gang; police eventually terminate the investigation.

Key Obstacles in Case Progression

Start with an “recoverability assessment,” then discuss pathways. This assessment is harsh but necessary: which accounts can still be frozen? which entities can be located? which evidence can form a closed loop?

Split “fund flow” into two parallel lines:

• Bank side: transfer chains, recipient account identities, fund destinations (whether concentrated or temporarily dispersed).
• Blockchain side: whether there are related aggregation, collection, cross-chain, or exchange entry nodes associated with known wallets.

The core variables in such cases are often not “whether to sue/file,” but “whether asset control can be achieved at key nodes.” We will explain each node’s feasibility and risks to clients during the process, so decisions are based on actionable information.

Case 3: NFT Investment Scam

A client purchased a series of high-value NFTs through an online platform, which claimed the NFTs could generate future art dividends and scarce digital rights. After paying about 5 million RMB, the platform suddenly shut down, the website became inaccessible, and the responsible person disappeared. Further investigation revealed backdoors in the NFT smart contract code, allowing assets to be transferred at will.

Key Obstacles in Case Progression

• NFTs, as derivative rights of digital assets, have both investment and trading attributes, and their legal characterization still has significant uncertainty under current rules.
• The platform entities and smart contracts are highly anonymous, combined with cross-border deployment, leading to practical difficulties in asset tracking, entity locking, and jurisdiction.
• Even if technical tracking via contract logs, on-chain records, or IP info is possible, cross-chain assets often involve multiple jurisdictions, making actual recovery extremely difficult.

Extended Practical Perspective

Translate technical facts into language understandable by judicial authorities: a backdoor in the contract means control is not in the client’s hands; “transfer at will” is a key fact supporting “illegal possession.”

Don’t focus only on on-chain evidence: bank flows, recharge records, platform promotional promises, dividend mechanisms, chat logs, contract terms, backend screenshots—these often resonate more with authorities than “on-chain analysis reports.”

Also, proactively clarify the probability of recovery: contract backdoors + cross-chain + anonymous structures essentially maximize asset recovery difficulty; criminal remedies may not “rescue” the assets, but at least help control key nodes.

Core Reasons for Obstacles in Civil Remedies

Reviewing the three cases above, despite their different types, they all encounter highly similar institutional barriers once entering the remedy phase in the civil path:

1. Criminal Priority Principle

• Behaviors involving criminal offenses must first be filed for investigation; civil litigation usually waits until criminal procedures are completed.
• Once a criminal judgment involves property rights, civil claims are subject to the doctrine of “res judicata.”
• If civil cases are transferred to public security authorities, and the court determines the behavior involves a crime, civil remedies are forcibly interrupted.

2. Difficulties in Cross-border Accountability

• The involved funds and suspects are distributed across multiple countries; cross-border evidence collection, investigation, and enforcement are highly restricted.
• Anonymity and programmability allow assets to be split and transferred quickly, further reducing recoverability.

3. Complexity in Asset Recognition and Behavior Characterization

• Crypto assets can be both payment tools and investment or derivative rights; their legal characterization directly affects the remedy path.
• Even if entering civil procedures, dispersed assets, insufficient evidence, or unclear legal application often lead courts to deny restitution requests.

Practical Implication

Civil remedies are limited not only by procedural issues but also by systemic constraints.

In cryptocurrency cases, criminal pathways remain the most realistic and feasible remedy, and the core role of lawyers is to help clients plan paths reasonably and avoid wasting the only remedy space through procedural misjudgments.

Practical Guidance for Lawyers: Move Beyond “Material Stacking” to “Path Control”

Based on the issues exposed at different stages in the three cases, the core capability of lawyers in cryptocurrency cases can be summarized into three levels: front-end risk identification, evidence and structural control during the process, and a clear understanding of institutional boundaries.

(1) Front-end: Identify Risks Early, Not Just Post-Event Remedies

• Legality assessment of transactions: analyze whether it involves illegal fundraising, fraud, or illegal operation risks, focusing on whether tokens have securities features.
• Asset attribute differentiation: payment or functional tokens are easier to classify as “circulating property”; tokens with profit promises are more likely to involve criminal intervention.
• Cross-border structure pre-judgment: whether it involves overseas entities, exchanges, or wallets, directly determines subsequent accountability difficulty.

(2) During the process: Build Evidence Chains Acceptable to Judiciary

• Standardize contracts and transaction records: clarify transaction purpose and rights/obligations, systematically preserve on-chain transaction flows and operations.
• Retain cross-border communication evidence: bank flows, platform emails, chat logs—pay attention to timing and continuity.

(3) Understand Institutional Boundaries: Path Choice Is a Strategy

• Most cryptocurrency cases cannot bypass criminal procedures; assess criminal pathway feasibility first.
• Civil litigation is more of a negotiation and fund recovery auxiliary tool rather than the main reliance.
• Lawyers must manage client expectations clearly, avoiding misunderstanding “procedural existence” as “inevitable result.”

(4) Advanced Practice: Move Toward “Critical Judgment”

Many cases, even with perfect materials, may still get stuck. The reason is often not capability but several “critical judgments”:

• How to interpret the nature of the behavior (fraud vs. dispute; organizer vs. intermediary; profit earner vs. tool).
• Can risk structures be pre-identified (profit promises, collection nodes, exchange entry points, control evidence).
• Is the window of opportunity still open (freeze nodes, investigation cooperation points, entity locking nodes).

These judgments are not explicitly written in laws but determine the case’s trajectory.

From “What Can Be Done” to “When It Can Be Done”: Making Key Judgments into Reusable Methods

Referring back to the three cases, a commonality emerges: many cryptocurrency cases are not “ruleless,” but have gaps between rules—characterization, jurisdiction, evidence, asset control nodes—each of which can halt case progression.

A more pragmatic point:

Even if lawyers prepare materials thoroughly, cases may still get stuck at certain nodes—not due to ability but because of encountering several “critical judgments”:

• Is this really fraud or a transaction dispute?
• Can the responsible entity be locked?
• Is the asset control window still open?

These judgments are difficult to clarify with a single legal rule or a few statutes. They resemble a “craft” in case handling: the same facts, some can be structured into a fileable case; others only suggest “suspected dispute.” The difference often lies in how evidence is organized, how paths are prioritized, and how nodes are stepped on.

Therefore, the closed-door seminar/practical training arranged in Zhengzhou this year aims not to “reiterate concepts,” but to decompose these judgments into practical, directly usable methods for lawyers:

• Focus on the nodes most prone to misjudgment and most affecting outcomes: when to prioritize criminal, when to seek preservation, when to use civil as an auxiliary, when to adjust strategies.
• Systematically dissect criminal entry points, jurisdictional handles, asset control nodes, and evidence closure methods.

This approach not only clarifies the basic logic of industry and transactions but also creates a reusable framework for high-risk structures, applicable charges and defenses, and key nodes in case progression. The goal is simple—help you return to practical work, be able to handle consultations confidently, and manage cryptocurrency criminal cases more steadily.