Why would someone's bank card be frozen if they sell U tokens on Xianyu to make a profit or use "wallet" to arbitrage U tokens?

Original authors: Deng Xiaoyu, Li Haojun

Recently, Deng's team received an inquiry from a student.

Xiao A (pseudonym) saw someone on Xianyu offering "high-price buyback of USDT," with an exchange rate two or three cents higher than that of the exchange. He felt he had found a business opportunity, so he bought USDT from the exchange and added the buyer on Xianyu via WeChat to complete the transaction.

The first trade earned him 50 yuan, very smoothly. The second trade earned him 200 yuan, also very smoothly. For the third trade, he pooled together 50,000 yuan as capital to try something big, but as soon as the money arrived in his account, his bank card was frozen.

When he checked with the bank, he found that his account had been frozen by the police for six months . To make matters worse, a few days later, he received a call from the local police station, asking him to come in and explain the situation, on the grounds that he was "suspected of aiding and abetting cybercrime."

A felt wronged: "I was just making money from the exchange rate difference, how did that make me a criminal?"

Based on recent inquiries about USDT arbitrage leading to frozen bank accounts, Attorney Deng will take you behind the scenes to uncover this hidden "digital black market" and see how those seemingly tempting "arbitrage" businesses gradually push ordinary people into the abyss of criminal activity.

Reason for freezing your card: You think it's arbitrage, but it's actually money laundering.

Searching for "USDT" on Xianyu (a Chinese online marketplace for secondhand goods) usually returns nothing, but if you search for "USDT sales," "game top-up," or "payment on behalf of others," you'll find a bustling underground market. This market is filled with posts offering "high-price buybacks" and "arbitrage opportunities through exchange rate differences."

Always remember this basic business principle : as a stablecoin, USDT's price is publicly and transparently displayed on all major exchanges. If someone is willing to buy your USDT at a price higher than the market price (for example, if the exchange sells it for 6.8, they offer 7.2), or ask you to make payments on their behalf, there's only one reason: their money is not clean.

Criminals involved in telecom fraud and online gambling have large amounts of dirty money. They dare not buy cryptocurrencies directly from exchanges (because of risk control measures), so they use C2C platforms like Xianyu to transfer the dirty money to you and exchange it for your clean USDT.

Throughout the entire chain, you acted as a "human money laundering machine ." The few hundred yuan "difference" you earned was actually a "money laundering fee" paid to you by criminals.

In-depth analysis: Criminal characterization behind three types of high-risk transactions

Based on numerous cryptocurrency-related criminal cases handled by Attorney Deng's team, these transaction patterns on Xianyu (a Chinese online marketplace) are highly likely to violate the following crimes under the Criminal Law. This is not an exaggeration, but rather a real-world example occurring in judicial practice.

Scenario 1: "Top-up/Payment on Behalf" - Crime of Concealing or Hiding the Proceeds of Crime

1. Scheme : Buyers claim they don't have foreign currency cards and ask you to help them purchase Steam gift cards, payment cards, or pay for overseas goods using USDT or foreign currency, promising to pay high commissions.

2. Legal characterization : This is a typical case of "physically isolated" money laundering.

• Objective behavior: You received funds from upstream (actually illicit funds) and laundered or transferred the funds by purchasing goods and recharging services.
• Subjective Determination: Many people argue, "I didn't know it was dirty money." However, in judicial practice, as a mentally sound adult, when faced with commissions significantly higher than market rates offered by strangers, or unreasonable transaction requests (such as bypassing formal payment channels), the law will presume that you "should have known" the source of the funds was suspicious.
• Consequences: This constitutes the crime of concealing or disguising the proceeds of crime, which carries a maximum penalty of three to seven years imprisonment.

Scenario 2: "Selling USB at a high price" - Crime of aiding and abetting cybercrime (assisting in cybercrime)

1. Operation method : Simple and crude, the other party buys back your USDT at a price higher than that of the exchange.

2. Legal characterization : This is a major area of ​​crime involving aiding and abetting.

• Key evidence: According to the "Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Illegally Using Information Networks and Assisting Information Network Crimes", "obviously abnormal transaction prices" is one of the core criteria for determining that the perpetrator had "subjective knowledge".
• The logical chain: You provided your bank card to receive fraudulent funds and completed the payment settlement using USDT. This behavior directly helped upstream criminals transfer stolen funds, which constitutes "providing payment settlement assistance" in a legal sense.
• Consequences: If the case meets the criteria for filing, the perpetrator may be sentenced to imprisonment for up to three years.

Scenario 3: "Buying and selling" - Crime of illegal business operations

1. Operating strategy : If you are not just selling U occasionally, but doing it for a living, you buy low and sell high to make a profit from the price difference.

2. Legal characterization : This behavior may be considered illegal business operations.

• Judicial Interpretation: In my country, engaging in disguised foreign exchange trading that disrupts the financial market order constitutes the crime of illegal business operations if the circumstances are serious. Although there is still controversy regarding whether USDT is equivalent to foreign exchange, in judicial practice in some regions, judgments have already been made classifying "reselling USDT" as the crime of illegal business operations. Once convicted, the sentence is often more severe than that for aiding and abetting fraud.

Civil risks: A state of being "naked" under a national-level notice

Besides facing imprisonment, those involved in encrypted transactions on Xianyu are also in a state of utter helplessness regarding their civil rights.

Since the September 24, 2021 notice, national-level announcements have clearly defined virtual currency-related business activities as illegal financial activities.

what does that mean?

• The contract is invalid, and you bear the loss yourself. If you were scammed while selling USDT on Xianyu (for example, the other party sent a fake transfer screenshot, or blocked you after receiving the USDT), and you sue in court to demand a refund, the court will most likely rule that your transaction contract is invalid based on the provisions of the Civil Code regarding "violation of public order and good morals" or "violation of mandatory provisions of laws and administrative regulations." In simpler terms: the law does not protect "black market" transactions. You'll have to bear your losses yourself.
• Not only will you not be able to get your money back, but you may also be fined. If your transaction is deemed by administrative authorities (such as the Administration for Industry and Commerce or the Public Security Bureau) to be an illegal token issuance financing or illegal business operation, you will not only lose the money you were scammed out of, but you may also face administrative penalties or even criminal charges.

Three life-saving tips for "side hustle enthusiasts"

For a pittance of profit, saddled with a criminal record and impacting three generations, it's simply not worth it. Here are three suggestions for all you "side hustle" enthusiasts:

1. Stay away from all "payment on behalf" and "purchase on behalf" : No matter how nice the other party's reason is ("not enough study abroad quota", "no foreign credit card"), if it involves you using your own account to help others transfer money , block them immediately. You are doing a side job, not doing charity, and certainly not being a "money laundering tool".

2. Beware of "premium" transactions : There's no such thing as a free lunch. Any purchase of cryptocurrency at a price higher than the exchange's market price is suspicious. Don't let a few cents' difference in exchange rate put you in the range of a crackdown on credit card fraud.

3. What should I do if my card is frozen?

• Don't believe the "scalpers who unfreeze your accounts" online ; that's a secondary scam.
• Don't panic . Contact the bank immediately to inquire about the freezing authority (usually a public security bureau in another region).
• Preserve evidence : Organize your chat history and transaction records on Xianyu. Although your actions may be illegal, in criminal defense, proving that you "had no subjective intent" (that you were just greedy and didn't know it was dirty money) is key to securing a decision not to file a case or prosecute.

Conclusion

You might think that "arbitrage trading" on Xianyu (a Chinese online marketplace) is just being a "cannon fodder" at the very bottom of a massive black market chain. Many young people mistakenly believe that the anonymity of blockchain is a natural barrier to crime, unaware that the "immutability" of on-chain data has become the most solid "ironclad evidence" for judicial authorities to convict and sentence individuals.

The upstream operators are hiding overseas, enjoying bloody profits; while you, downstream, become the easiest and lowest-cost target for the police to crack down on because of your real-name authenticated bank cards and Alipay accounts.

Don't wait until you're behind bars to realize the weight of the word "compliance".