Shandong Court in China Tries Case of Entrusted Investment in Virtual Currency Resulting in Loss, Rules Plaintiff Bears Own Loss

March 18 – The Zhangqiu District People’s Court in Jinan, Shandong Province, China, has released a typical case involving virtual currency investment, where a plaintiff’s claim to recover funds was rejected. **Case Background**: Liu entrusted his friend Zhang to invest in “Alpha Coin,” a platform that advertised daily profits of hundreds of yuan. After Liu invested, the platform became inaccessible. Zhang later learned the platform’s operator was under investigation for alleged criminal activity. Liu then sued Zhang, demanding the return of his investment. **Court Ruling**: The court found that virtual currency investment disrupts financial order and threatens financial security, so the entrustment contract between Liu and Zhang was invalid. Since Zhang did not profit from the arrangement, the investment loss—stemming from risks of illegal financial activities—was ruled to be Liu’s responsibility. **Judge’s Reminder**: Announcements from seven Chinese government departments in 2017 and a 2021 notice from ten departments explicitly classify virtual currency-related businesses as illegal financial activities. Losses from such investments are not protected by law. Even if transactions are conducted through a third party, if they involve virtual currency trading in essence, they remain unprotected. Source: The Paper News