Virtual Money Investment Traps: Beware of "Xinkangjia" New Type Eyewash

Recently, "Xinkangjia" has become a hot topic on multiple social media platforms and investment discussion groups. It is understood that the platform has been active since 2023, operating under the name "Dubai Gold Exchange China Branch." Initially, it used crude oil futures investment as a gimmick, but later gradually shifted towards fields such as "big data investment," "foreign exchange investment," and "Virtual Money investment." Participants are required to pay a membership fee of 1000 USDT, and members are developed according to a militarized organizational structure, with a rebate mechanism existing between different levels.

On June 26 this year, the Xinkangjia platform suddenly closed all withdrawal channels. It is reported that approximately 2 million investors in the country were affected, with the amount involved reaching around 18 billion. Even more worrying is that these funds may have been transferred and laundered through Virtual Money USDT.

It is worth noting that as early as April this year, the Dubai Gold and Commodities Exchange (DGCX) issued a statement clearly stating that DGCX has not established any affiliated institutions or partners in China. In addition, since 2024, some departments in mainland China have also issued warnings regarding Xin Kang Jia multiple times.

The Criminal Activities Involved in the Xinkangjia Model

Although there is currently no official agency that has formally announced the criminal nature of Xin Kang Jia, analysis based on existing information suggests that the operation model of the platform is likely to involve organizing and leading pyramid selling activities or illegal fundraising crimes (especially fundraising fraud).

From the perspective of judicial practice, if classified as illegal fundraising, there will be a huge workload, including statistics, contacting, and returning funds to about 2 million investors. In addition, it is also necessary to resolve the issue of whether to return USDT or to convert the Virtual Money into cash and then return it in RMB.

In contrast, if classified as a pyramid scheme crime, the handling would be relatively simple. In current judicial practice, pyramid scheme cases are often considered to have no victims, and the funds involved are usually confiscated and turned over to the national treasury. This approach not only enriches the finances but also saves judicial resources.

Handling of Investor Funds in Pyramid Scheme Crimes

Unfortunately, according to the current judicial practice in mainland China, it is very difficult for the investment funds in pyramid schemes to be returned to the investors. The main reasons include:

1. The funds involved are mostly classified as "illegal gains", which are subject to seizure, freezing, and confiscation according to the law, and are ultimately forfeited to the national treasury.

2. When judicial authorities handle pyramid scheme cases, the primary task is to combat crime and maintain financial order. Even if the investors' original intention is to invest, they inevitably contribute to the platform's expansion in an objective sense.

3. Many pyramid scheme platforms have transferred a large amount of funds abroad or laundered money through Virtual Money before being investigated, making it difficult to enforce restitution even if they win the lawsuit.

Nevertheless, there are a few cases in judicial practice where funds are returned to investors. For example, in certain pyramid scheme cases, the court clearly recognizes ordinary investors as victims and rules for the return of their investment. However, such situations are relatively rare and do not represent the general handling of future cases.

Legal Risks of USDT Investment

The special aspect of the Xinkangjia case is that investors use USDT for investment. However, this does not mean that the rights and interests of investors can be better protected. In fact, under the legal environment in mainland China, USDT investments face many risks:

1. Virtual Money is not legally compensable, and related transactions are not protected by law. Since 2017, mainland China has explicitly banned Virtual Money transactions, and any related business activities are regarded as illegal financial activities.

2. Although some judicial rulings recognize that Virtual Money has certain "property attributes", this only applies within the scope of criminal law and does not imply support for the legality of its trading or investment.

3. Even if the assets involved are virtual money such as USDT, the public security organs will still freeze and seize them according to the law, and they will be confiscated as illegal gains after conviction. These assets are very likely to be converted into legal tender and submitted to the treasury, making it almost impossible for investors to recover them.

Suggestions for Preventing Virtual Money Financial Traps

The "Xin Kang Jia" case warns us once again that those virtual money investment projects that flaunt terms like "blockchain", "USDT", "mining machines", and "task platforms" are essentially traditional Ponzi schemes. They use the guise of "financial innovation" but are in reality a mixture of illegal fundraising, pyramid schemes, and fraud.

Investors should stay alert and remember the following points:

• Be wary of promises of "guaranteed profits"
• Stay away from "referral schemes" and "commission sharing" models
• Do not blindly trust so-called "investment experts" or "financial teachers" online.
• Report suspicious platforms to the relevant authorities in a timely manner.

In short, the law cannot protect non-compliant speculative behavior. Every investor should keep their eyes open, safeguard their property, and avoid falling into the traps of eyewash.