Seminar Sidelights | The True Face of Crypto: A Glimpse into Cryptocurrency Operations and Modus Operandi (Part 1)

Last edited: 2026-11-04

Taichung Office, Taiwan Association for Judicial Reform

For this lecture, the JRF invited Attorney Liao Ch'i-wen to discuss new types of cryptocurrency scams. The lecture began with an introduction to NFTs and cryptocurrency, moved on to common and novel fraudulent schemes, and concluded with a Q&A session.

First, Attorney Liao introduced legitimate channels for investing in NFTs and cryptocurrencies. Attorney Liao noted that cryptocurrencies are "fungible tokens" developed through "blockchain technology." Blockchain technology is a decentralized ledger system; its advantage lies in recording transaction information publicly, making forgery or tampering difficult. However, because blockchain technology is highly anonymous, while it offers better privacy protection, it easily falls prey to becoming a tool for money laundering.

In addition, cryptocurrencies are "decentralized"—they are not fiat currencies issued by central banks and can only be traded, transferred, and stored electronically. Types of cryptocurrencies include stablecoins, which further comprise fiat-backed stablecoins (e.g., USDT), crypto-backed stablecoins, and algorithmic stablecoins. Common trading platforms include Binance, Huobi, and BitoPro. Common storage methods include hot wallets, cold wallets, or storage on exchanges; however, storing assets on exchanges carries the risk of being hacked. Attorney Liao suggested that those who choose to store assets on exchanges should select large-scale exchanges backed by trust funds. Transaction fees are usually charged when trading cryptocurrencies on trading platforms or exchanges; however, acquiring cryptocurrencies through mining—that is, using computer algorithms—does not incur transaction fees.

"NFTs," on the other hand, are non-fungible tokens, where every NFT is an independent token. NFTs are also derived from blockchain technology. NFTs serve as an investment tool; unlike securities products, they are not strictly regulated by securities laws, and mainstream views currently do not consider them to be governed by the Copyright Act. A prominent trading platform for NFTs is OpenSea.

Attorney Liao then transitioned to introducing novel fraud schemes. Crimes potentially involved in cryptocurrency fraud include fraud and aggravated fraud under Article 339 of the Criminal Code, as well as the Money Laundering Control Act. Common fraudulent scenarios currently seen in the market include:

Fabricating Initial Coin Offering (ICO) projects: Fraudsters often concoct token issuance plans to lure investors into traps, using funds raised from later investors to pay returns to earlier investors, thereby creating the illusion of stable returns—a "Ponzi scheme," commonly known as a "mouse gang" (multi-level marketing fraud) tactic, which leaves deceived investors penniless. A past example is OneCoin.
Fraud also frequently occurs in Over-The-Counter (OTC) trading scams, where fraudsters demand that investors wire money first and then deliver cryptocurrencies via face-to-face transactions, duping those who do not understand that cryptocurrencies are traded based on internet encryption technology.
Another common tactic seen recently involves dating scams: fraud syndicates often use dating apps or websites to lure users into investing funds into forged cryptocurrency trading websites.

In the aforementioned scam scenarios, fraud rings typically acquire or trick people into giving up dummy accounts, and then runners (cash couriers) use ATM cards to withdraw the money. When encountering such situations, members of the public should report the loss and go to the police, supporting their claims with physical evidence (e.g., recruitment ads for cash runners, account records).

Finally, during the Q&A session, Attorney Liao's responses to the audience are briefly summarized below:

Q&A: Is there room for discussion regarding cryptocurrencies or NFTs under the Securities and Exchange Act? Or will they revert to the Civil Code?

An official letter interpretation by the Financial Supervisory Commission (FSC) does not recognize cryptocurrency as currency; the Securities and Exchange Act remains confined to the regulations of traditional securities; the Criminal Code has regulations related to electromagnetic records, but the Civil Code lacks relevant provisions. Difficulties arise at the execution level of the Civil Code; for instance, if a sales contract is breached, the court will encounter difficulties during enforcement regarding its legal categorization. If it is classified as property, it has no physical existence. Additionally, cryptocurrencies may be located overseas. Some civil law scholars believe they can be categorized as "agreement-based currencies." Meanwhile, China has discussed creating a new classification for them.

Q&A: A college student's account was defrauded once, but the fraud case involves 6 police departments and 5 district prosecutors' offices. Is there a way to avoid repeatedly traveling to multiple courts?

Property involves individual legal interests, resulting in multiple counts of crime. Current practical practice involves having an attorney urge the police to transfer all cases to the district prosecutors' office of the defrauded account holder's place of residence. Once litigation begins, it depends on whether the judge is willing to exercise centralized jurisdiction and consolidate the trials. However, the victims who were defrauded may not necessarily be willing to cooperate.

Q&A: In a Ponzi scheme, how do we distinguish between a victim and an accomplice?

This is determined by examining whether they objectively participated in the constitutive elements of the crime, and whether they subjectively possessed the intent to defraud.

Q&A: Should unjust enrichment from fraud be pursued against the dummy account holder or the fraud syndicate?

Opinions are divided; some hold the former view, while certain court opinions hold that the fraud syndicate is the one with actual control over the account.