Chinese Court Rules Virtual Currency Mining Contract Invalid, Plaintiff Bears Losses

According to reports, the People's Court of Guiyang County, Hunan Province, China recently concluded a case involving a dispute over a virtual currency mining contract. The plaintiff, Hu, cooperated with others in virtual currency mining activities. Due to the loss of mining equipment, he sued the court to return the 570,000 yuan investment. The court ruled in accordance with the law to reject all of the plaintiff's claims.

Hu and Zhou are friends. A technology company was established in May 2021, with Zhou as one of the shareholders, while Li and Peng participated in the mining business through related relationships. They agreed to cooperate in mining, with Hu paying Zhou $55,000 through a virtual currency app (equivalent to 357,082 yuan) and transferring 198,000 yuan to Zhou through Cao, totaling 555,082 yuan. The funds were used to purchase servers, hard drives, and other mining equipment, which were managed and operated by the technology company. In July 2022, the equipment was moved to Zhou's kitchen for storage, and Hu only paid the electricity bill thereafter. In November 2023, Li took some hard drives due to an economic dispute with Zhou. Despite mediation by the police, Li returned 82 hard drives, but Hu claimed that some hard drives were still missing, leading to unsuccessful negotiations. In 2024, Hu sued the four defendants for the loss of equipment, seeking the return of the 570,000 yuan investment.

After the trial, the court determined that according to the joint notice issued by ten departments including the People's Bank of China on preventing and dealing with the risks of virtual currency trading speculation, virtual currency does not have the same legal status as legal tender, does not have legal compensation, and should not and cannot be used as currency in the market. Activities related to virtual currency are considered illegal financial activities. Participation in virtual currency investment and trading activities carries legal risks. Any legal person, organization, or individual investing in virtual currency and related derivatives, contrary to public order and good customs, will bear the losses resulting from such civil legal actions. In this case, the equipment purchased by Hu for mining, payment in virtual currency, and settlement management fees all undermine the legal status of legal tender and violate public order and good customs. The entrusted contract in question should be deemed invalid.

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