Ningxia Court in China Mediates a Virtual Currency Investment Delegation Dispute Case

BlockBeats message: On April 2, the Xingqing District Court in Ningxia, China, concluded a case involving a dispute over delegated investment in virtual currency. The plaintiff, Wei, instructed the defendant, Li, and Hu, to invest in virtual currency. Since Wei urgently needed funds and the defendants did not return the money, Wei sued for “unjust enrichment.”

After reviewing the case, the court found that the stated cause of action deviated from the actual legal relationship and proactively explained the legal risks, guiding the parties to correctly understand the legal nature of the agency agreement relationship. Ultimately, the plaintiff withdrew the lawsuit against Hu, Li returned the investment principal, and both sides reached a mediation settlement.

During mediation, the presiding judge explained the litigation risks to the plaintiff and held that the basic legal relationship in this case should be that of an agency agreement. Based on the evidence currently available, continuing the lawsuit on the ground of unjust enrichment carries a high risk of losing. If the plaintiff loses this time, the plaintiff would need to collect evidence separately and refile the case as a dispute over an agency agreement, which would consume a large amount of time and effort. At the same time, the judge also analyzed the pros and cons for the defendant: Although the plaintiff’s currently filed cause of action is unjust enrichment, there is indeed a real delegated investment relationship between the two parties, and the plaintiff’s demand for repayment is supported by corresponding facts. If the case proceeds as a dispute over an agency agreement, depending on the evidence, the defendant is very likely to bear the obligation to make repayment.

The judge also reminded: According to judicial views of the Supreme People’s Court, an agency investment agreement for virtual currency is an invalid contract (signed after September 4, 2017), and losses are shared according to the degree of fault. Investors need to accurately choose how to assert their rights under the relevant legal relationship to reduce litigation risk. (The Paper)