The case

A Shenzhen network engineer, given the pseudonym “Li Dong”, was summoned by police in Zhangjiajie, Hunan, in 2024, who seized 103 bitcoins and liquidated part of them for about RMB 50 million, which they held. Four days after Li was released on bail, police in Changge, Henan arrested him and seized another 80 bitcoins worth an estimated RMB 80 million.

The offence alleged was “illegally obtaining computer information system data”. It is a typical case showing the real criminal risk of holding large amounts of crypto assets in China.

Why was it seized? Understanding the criminal risk of OTC cash-outs

OTC (over-the-counter) trading is the mainstream way to cash out USDT in China: peer-to-peer exchange of Tether-issued USDT for RMB. But if the RMB received in an OTC trade is telecom-fraud money (stolen funds), two levels of legal risk arise:

  • Civil / administrative: police can freeze accounts and demand return of the stolen money; in serious cases the account is listed as involved in a case, affecting all your bank cards.
  • Criminal: under Article 312 of the Criminal Law (concealing or disguising criminal proceeds, 掩隐罪) and Article 287-2 (assisting information-network criminal activities, 帮信罪), an OTC trader may be found to have “knowingly helped transfer criminal proceeds”.

Whether it is a crime turns on “knowledge”. In judicial practice, the following are often treated as evidence of knowledge:

  • Cash transactions (presumed to evade tracing)
  • Frequent large transactions
  • Exchange rates clearly off the market price
  • Many unfamiliar counterparties, trades across provinces
  • The counterparty’s funds proven to be fraud proceeds

Why is a bitcoin seizure so serious?

Unlike a bank freeze, once police seize bitcoin, the ownership recorded on the blockchain is almost impossible to recover. Liquidation usually goes like this:

  • Police engage a third-party company to operate the private keys → transfer to a police-controlled wallet → sell on an exchange for RMB → hold the proceeds as seized funds.
  • Because blockchains are decentralised and cross-border, “seizure” is technically more complete than freezing a bank account.
  • In this case, police “liquidated RMB 50 million” before Li was bailed — showing that “freeze + liquidate” is real practice.

Possible remedies for holders

If your crypto assets have been seized or liquidated by police, you can try:

  • Step 1: Identify the seizing authority (which public security bureau?) and obtain the Seizure Decision and Seizure List.
  • Step 2: Confirm the alleged offence (concealing proceeds? assisting information-network crime? illegally obtaining computer data?).
  • Step 3: Have a lawyer submit a legal opinion seeking revocation of the seizure or an objection to the finding of illegal gains.
  • Step 4: Apply for administrative reconsideration or file an administrative lawsuit.
  • Step 5: If the case enters criminal proceedings, apply to change compulsory measures, file appeals and complaints, and claim criminal (state) compensation.

These routes usually take 6–18 months.

Principles for compliant cash-outs

  • Use licensed OTC platforms and compliant channels with fund custody.
  • Avoid cash transactions and frequent trades with strangers.
  • Don’t let your exchange rate deviate significantly from the market.
  • Keep all transaction records (chats, transfers).
  • If you find funds received may be fraud proceeds, stop trading and report to police immediately.
  • Avoid large single-day amounts and high-frequency trading with many people; spread channels and timing.

The real risks of U-cards, cash and overseas exchanges

We have recently handled several cases of frozen U-cards and traced cash USDT trades. Common myths:

  • “Cash won’t be detected.” Wrong. Cash is presumed to indicate knowledge.
  • “Spending on a U-card won’t get frozen.” Wrong. U-cards’ compliance is questionable, and once bank records don’t match up there is risk.
  • “Cashing out on an overseas exchange is fine.” Wrong. When an overseas exchange cashes out via USDT, the receiving RMB account is still in China and subject to Chinese regulation.
  • “Small, repeated amounts are safe.” Wrong. Amounts are aggregated when determining the sum involved.

How Wang Xin’s team can help

  • Compliance assessment of USDT cash-out routes.
  • Defense in OTC fraud-related cases (concealing proceeds, assisting information-network crime).
  • Advice on U-card and Binance withdrawal compliance.
  • Appeals, administrative reconsideration and criminal compensation after seizure of bitcoin and other crypto assets.
  • End-to-end release of cards frozen after foreign-exchange cash-outs.

In an emergency, call +86 186-0113-9509 or message WeChat wang223040.

Quick answers

Is cashing out USDT through OTC trades a crime in China?
Not in itself, but if the RMB received is telecom-fraud money, the seller can face account freezes and, if “knowing” is found, charges of concealing criminal proceeds (Criminal Law Art. 312) or assisting information-network crime (Art. 287).
What makes Chinese courts find an OTC seller “knew” funds were criminal?
Common indicators include cash transactions, frequent large trades, exchange rates clearly off the market, many unfamiliar or cross-province counterparties, and funds later proven to be fraud proceeds.
What can you do if Chinese police seize your crypto?
Identify the seizing authority and obtain the seizure decision and list, confirm the alleged offence, have a lawyer submit legal opinions challenging the seizure, apply for administrative reconsideration or litigation, and in criminal proceedings seek changes to measures, appeals and state compensation. It typically takes 6–18 months.

This is an English edition of Wang Xin’s original Chinese article, 持有 183 个比特币被扣上亿资金？USDT 出金的刑事红线. It explains the law of the People’s Republic of China in general terms and is not legal advice for any particular case; outcomes depend on the specific facts and on how local authorities apply the rules.