The eyewash of Virtual Money investment reappears, beware of "new wine in old bottles"

Recently, an investment project called "Xin Kang Jia" has frequently appeared on social platforms and investment groups. This project has been active since 2023, claiming to be the "Dubai Gold Exchange China Branch", initially starting with crude oil futures investment, and later expanding into "big data investment", "foreign exchange investment", and "Virtual Money investment". Participants are required to pay a membership fee of 1000 USDT, and the organizational structure adopts a "militarized" model with rebate relationships between different levels.

On June 26 this year, the Xinkangjia platform completely closed its withdrawal channels. It is reported that about 2 million investors in the country are affected, with the amount involved possibly reaching 18 billion. Even more concerning is that this money may have already been transferred and cleaned through Virtual Money USDT.

In fact, as early as April of this year, the Dubai Gold and Commodities Exchange (DGCX) issued a statement indicating that DGCX has not established any affiliated institutions or partners in China. Furthermore, since 2024, several departments in mainland China have also issued warnings against Xin Kang Jia.

From a legal perspective, the operating model of Xinkangjia is likely to constitute the crime of organizing and leading pyramid selling activities or illegal fundraising crimes (especially possibly the crime of fundraising fraud). However, no official institutions have formally confirmed its criminal nature yet.

The situation regarding the most concerning issue for investors, the recovery of funds, is not optimistic. According to current judicial practices in mainland China, funds involved in pyramid scheme crimes have very little chance of being returned to investors. The main reasons include:

1. The funds involved are usually classified as "illegal gains" and shall be confiscated and turned over to the national treasury according to the law.
2. Judicial authorities prioritize combating crime and maintaining financial order, rather than protecting the interests of individual investors.
3. Most pyramid schemes have transferred funds abroad or laundered money through Virtual Money before being investigated, making it extremely difficult to recover.

It is worth noting that the special aspect of the Xinkangjia case is that investors used USDT for investment. However, this does not mean that investors can obtain more legal protection. On the contrary, due to the clear prohibition of virtual money transactions in mainland China, related investment activities are not legally protected. Even if certain judgments recognize that virtual money has certain "property attributes," this is limited to the scope of criminal law and does not equate to supporting the legality of its trading or investment.

For cases involving Virtual Money, judicial authorities still tend to regard it as illegal gains to be confiscated. Therefore, even virtual assets such as USDT may ultimately be converted into fiat currency and submitted to the national treasury, with investors being almost unable to obtain a refund.

This case serves as a warning to us to be vigilant against virtual money investment projects that operate under the banners of "blockchain", "USDT", "mining machines", and so on. These projects are essentially variants of eyewash schemes, disguised as "financial innovation", but in reality are a combination of illegal fundraising, pyramid schemes, and fraud.

In the current legal environment of mainland China, Virtual Money investment is not only unprotected by law, but participants may also bear legal responsibilities for "participating in pyramid schemes" or "assisting in money laundering." Therefore, in the face of the temptation of Virtual Money and high returns, investors should remain rational.

• Refuse the promise of "risk-free profit"
• Stay away from "referral" and "commission sharing" models
• Do not easily trust "investment experts" or "financial teachers" online.
• Report suspicious platforms to the public security authorities in a timely manner.

Legal and rational investments are the only ones that can gain legal protection. I hope every investor can keep their eyes open, safeguard their wallets, and no longer become victims of eyewash.