Duties Embezzlement Crime in the Employee Risk Prevention of NFT Digital Collection Company

Duties Embezzlement Crime in NFT Digital Collection Company's Employee Risk Prevention

Legal Ceiling for Working People in the Workplace

The crime of embezzlement is the most prevalent criminal risk in the workplace in the past decade. It is also the most effective deterrent weapon for the victim (the company) in anti-fraud efforts. Although the number of court judgments has decreased in recent years, this crime is still a criminal risk that both workers (whether they are employees or employers) should pay attention to.

(The figure shows the number of public judgments on the crime of embezzlement in the past decade, source: alpha)

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Lawyer Liu has encountered legal consultations on the possible crime of embezzlement by employees of NFT digital collectible companies more than once, including consultations from company owners seeking legal protection and consultations from employees who are unsure about the nature of their actions and fear being involved in criminal activities. Therefore, in this article, Lawyer Liu will sort out and summarize the possible situations and legal analysis of employees of digital collectible companies who may be involved in the crime of embezzlement, for the reference of digital collectible companies and their employees.

What exactly is the crime of embezzlement?

The crime of embezzlement, as the name suggests, refers to the crime of embezzling a company’s property by taking advantage of one’s position. More precisely, it refers to the illegal possession of a company’s property by using the convenience of one’s position as a employee of the company, enterprise, or other organization, and the amount involved is relatively large.

To accurately identify the crime of embezzlement, the following three questions need to be clarified:

(1) Who can be charged with the crime of embezzlement?

This refers to the issue of the criminal subject. For employees of a company, it can be divided into regular employees, contract workers, temporary workers (interns), etc. Can they all be considered as “employees of the company” who may be charged with the crime of embezzlement? The answer is yes.

The key to determining this crime is whether the person has used the convenience of their position to illegally possess the property of the employing organization. Whether they are full-time or part-time, contract workers or temporary workers is not relevant.

(2) How to judge “taking advantage of the convenience of one’s position”?

In the crime of embezzlement, when the perpetrator engages in certain activities using the convenience within their scope of authority, it is considered as taking advantage of the convenience of one’s position. However, if the official position of the perpetrator and the actual range of duties are inconsistent, how should it be determined? The answer is that the actual range of duties should be used as the criterion. For example, if Zhang San is officially a technician of a company but actually performs financial work for the company, when determining whether Zhang San constitutes the crime of embezzlement, his actual work, namely financial work, should be taken into account.

(3) How much money will trigger a case?

How much money does embezzlement need to be filed by the public security and convicted by the court?

According to the “Provisions on the Standards for Filing and Prosecuting Criminal Cases Jurisdiction by Public Security Organs (II)” issued by the Ministry of Public Security and the Supreme People’s Procuratorate on April 6, 2022, if the amount involved in the embezzlement case exceeds 30,000 yuan, the public security organ should file a case;

However, according to the “Interpretation on Several Issues Concerning the Application of Laws in Handling Criminal Cases of Bribery and Embezzlement” issued by the Supreme People’s Court and the Supreme People’s Procuratorate on April 18, 2016, the court believes that the starting point for constituting the crime of embezzlement (i.e., the starting point for “a relatively large amount”) is 60,000 yuan.

What is the criteria for the crime of embezzlement, 30,000 yuan or 60,000 yuan?

Lawyer Liu believes that according to the principle of favoring the suspect in criminal law, the standard should still be 60,000 yuan. Even if the regulations of the Supreme Court and the Supreme Procuratorate are relatively outdated, whether the suspect is guilty does not depend on whether the public security organ files a case against him, but on how the court finally judges. The Supreme People’s Court also explicitly stipulates in Article 1 of the “Notice on Referring to the Application of the Regulations on the Standards for Filing and Prosecuting Criminal Cases Jurisdiction by Public Security Organs (II) by the Supreme People’s Procuratorate and the Ministry of Public Security in Economic Crime Trials” that “the Supreme People’s Court has no regulations on the conviction and sentencing standards for relevant economic crimes, and the people’s court can refer to the provisions of ‘Standard II’ when trying economic crime cases.”

First of all, the court can refer to the standards for filing cases by public security organs (in other words, it can also choose not to refer); secondly, the premise for referring to the standards is that the Supreme Court has not made any regulations on the conviction and sentencing of relevant economic crimes.

Currently, the judicial interpretation of the starting point of 60,000 yuan for the crime of embezzlement by the Supreme Court is still valid, so in principle, the standards for filing and prosecuting by the public security department cannot be applied, which means that the starting point for sentencing the crime of embezzlement should still be 60,000 yuan.

What behaviors are suspected of the crime of embezzlement?

For Shu Cang Company, in order to safeguard the company’s property interests, it is necessary to attach importance to the investigation and evidence collection of employees suspected of embezzlement crimes in anti-corruption investigations. Based on the practical experience of our Mankun Law Firm, Lawyer Liu summarized the common acts of embezzlement by Shu Cang Company:

The first situation is that when company employees issue digital collectibles, they use their job convenience to purchase related whitelist or collectibles through their controlled accounts. They then use their job convenience to obtain insider information and sell the collectibles on the secondary market for personal gain. At first glance, this behavior does not seem to meet the requirement of “illegally taking possession of the unit’s property” in the crime of embezzlement. However, upon careful analysis, it is not difficult to find that this behavior essentially involves employees using their job convenience to create an additional trading link, that is, employees purchase digital collectibles from the company and then sell them on the secondary market. At this time, for the company, it loses the opportunity to sell digital collectibles at a reasonable price as the seller; for the buyer of digital collectibles, it loses the opportunity to trade directly and fairly with the company, and can only purchase digital collectibles from company employees at a high price in the secondary market. From the perspective of the substantive act of criminal law, the employee has taken possession of the company’s future income, which still constitutes a suspected crime of embezzlement.

The second scenario is when an employee, taking advantage of their managerial position, privately transfers the unsold remaining digital collectibles of the company for personal gain, and then sells them on the secondary market. This behavior is a typical case of embezzlement and does not require much legal analysis.

The above two scenarios are relatively common forms of embezzlement in practice. It is not excluded that there are other patterns of embezzlement waiting to be discovered or even “invented” in the complex and diverse real life. Lawyer Liu will also analyze and discuss these patterns in the future.

How can the Numerical Collectibles Company prevent it?

For the Numerical Collectibles Company, in addition to ensuring daily business compliance, it should also pay attention to the development of its anti-fraud business. In reality, there are countless patterns of embezzlement, and they are likely to continue to “evolve and innovate”. Once internal fraud and corruption, including embezzlement, erupt, they often deal a fatal blow to the company – as the saying goes, it’s easier to guard against external enemies than internal thieves.

In addition, the Numerical Collectibles Company should also standardize the registration and internal management processes of digital collectibles, establish a systematic management model, clarify the supervisory and management responsibilities between superiors and subordinates, and different positions. At the same time, employee behavior norms should be clearly defined, such as establishing rules prohibiting employees from participating in secondary market transactions, and elevating them to company “red line rules” to cultivate employees’ bottom line awareness and prevent embezzlement at the institutional level.

Finally, the Numerical Collectibles Company can also invite external lawyers to evaluate and test the company’s development quality, compliance system, etc., to ensure the long-term development of the company.

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