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

Mars Finance news: On April 2, the Xinqing District Court in Ningxia, China concluded a dispute over entrusted investment in virtual currency. The plaintiff, Wei, entrusted the defendants, Li and Hu, to invest in virtual currency. After failing to get the funds returned due to an urgent need for money, the plaintiff filed suit on the grounds of “unjust enrichment.”

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

During the mediation, the presiding judge explained litigation risks to the plaintiff and held that the underlying legal relationship in this case should be that of an entrustment contract. Based on the existing evidence, continuing to litigate on the grounds of unjust enrichment carries a relatively high risk of losing. If the plaintiff loses this case, the plaintiff would need to gather evidence again and sue anew for a dispute under an entrustment contract, which would consume a great deal of time and effort.

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 entrusted investment relationship between the two parties, and the plaintiff’s demand for return of the funds is supported by corresponding facts. If the case proceeds to litigation as an entrustment contract dispute, depending on the evidence, the defendant is highly likely to bear responsibility for returning the funds.

The judge reminded: According to the Supreme People’s Court’s judicial views, entrusted investment contracts for virtual currency are void contracts (signed after September 4, 2017), and losses are shared according to the degree of fault. Investors must accurately choose how to assert their rights under the correct legal relationship to reduce litigation risk. (The Paper)