An appellate decision from a provincial high court in northeastern China may help to shed some additional light on the Chinese government’s regulation of virtual currency exchanges in China, the anti-money laundering (AML) and know-your-customer (KYC) expectations placed on these exchanges, and the liability that might accrue to exchanges in the event of criminal activity involving virtual currencies.
The Lekuda (OKCOIN trading platform) case was initially filed in the civil division of the intermediate court of the municipality of Suihua (绥化) in northeastern China, Heilongjiang Province. Coincidentally, China’s northeastern region is also known for Bitcoin mining. In China, there are three types of litigation (三类诉讼), each with their own set of procedural rules and jurisprudence, and the Lekuda case filed in Suihua was styled as a tort case, a type of civil litigation. While characterized and classified as a civil tort case, the case also implicates certain criminal and administrative issues at its periphery.
The decision that was recently made publicly available was the July 2016 decision of the second instance court (an appellate decision). The underlying Suihua intermediate court decision has not yet been made publicly available, but may eventually become so. That said, from the appellate decision, we can learn the basic facts.