Author: Liu Zhengyao, Source: Shanghai Mankun Law Firm
The Illegal Ceiling for Working Class
Embezzlement of duties is the most frequent criminal risk in the workplace in the past decade. It is also the most advantageous deterrent weapon for the victim (the company) in anti-fraud measures. Although the number of court judgments has decreased in recent years, this charge is still a criminal risk that both employees (whether they are workers or employers) in the workplace should pay attention to.
(The figure shows the number of public judgments on embezzlement of duties in the past decade, source: alpha)
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Lawyer Liu has encountered more than one legal consultation regarding the possible involvement of employees of NFT digital collectible companies in embezzlement of duties. Some are inquiries from company owners seeking legal advice for protection, while others are inquiries from employees who are unsure about the nature of their actions and fear involvement in criminal offenses. Therefore, through this article, Lawyer Liu will sort and summarize the possible situations and legal analysis of employees of digital collectible companies who may be involved in embezzlement of duties, providing references for digital collectible companies and their employees.
01 What is Embezzlement of Duties?
Embezzlement of duties, 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 an employee of the company, enterprise, or other organization using the convenience of their position, constituting a crime when the amount involved is significant.
To accurately identify embezzlement of duties, the following three questions need to be clarified:
(1) Who can be charged with embezzlement of duties?
This refers to the question of the subject of the crime. For employees of a unit, it can include regular employees, contract workers, temporary workers (interns), etc. Can they all be considered “employees of the unit” who may be charged with embezzlement of duties? 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 unit. It does not matter whether they are full-time or part-time, contract workers or temporary workers.
(2) How to determine “using the convenience of one’s position”?
In the crime of embezzlement of duties, if the person uses the convenience within the scope of their official authority to engage in certain activities, it is considered using the convenience of their position. However, if the person’s official position and the actual scope of their duties are not consistent, how should it be determined? The answer is that the actual scope of duties should be used as the criterion. For example, if Zhang San is formally a technical staff member of the company but is actually engaged in financial work, when determining whether Zhang San constitutes embezzlement of duties, it should be based on Zhang San’s actual work, which is financial work.
(3) How much money will trigger a case?
How much money does it take for the police to file a case and the court to convict in cases of embezzlement of public office?
According to the “Provisions on the Standard for the Filing and Prosecution of Criminal Cases 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 a case of embezzlement of public office exceeds 30,000 yuan, the public security organs should file a case;
However, according to the “Interpretation of Several Issues Concerning the Application of Laws in Handling Criminal Cases of Corruption and Bribery” 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 the crime of embezzlement of public office (i.e., the starting point for “a relatively large amount”) is 60,000 yuan.
What is the standard for the crime of embezzlement of public office, 30,000 yuan or 60,000 yuan?
Lawyer Liu believes that according to the principle in criminal law that is favorable to the suspect, the standard should still be 60,000 yuan. Even though the regulations of the Supreme People’s Court and the Supreme People’s Procuratorate are relatively outdated, whether the suspect is guilty or not depends not on whether the public security organ files a case against them, but on how the court ultimately judges. The Supreme People’s Court also explicitly states in Article 1 of the “Notice on Referring to the Provisions of the Supreme People’s Procuratorate and the Ministry of Public Security on the Standard for the Filing and Prosecution of Criminal Cases by Public Security Organs (II) in the Trial of Economic Crime Cases” that “If the Supreme People’s Court has not provided the conviction and sentencing standards for relevant economic crimes, the people’s court may refer to the provisions of ‘Standard II’ in handling economic crime cases.”
Firstly, the court can refer to the standard for filing cases by the public security organs (in other words, it can also choose not to refer); secondly, the premise for referring to the standard is that the Supreme People’s Court has not provided the conviction and sentencing standards for relevant economic crimes.
Currently, the judicial interpretation of the Supreme Court regarding the starting point of 60,000 yuan for the crime of embezzlement of public office is still valid, which means that the standard for filing and prosecuting cases by the public security authorities should not be applicable in principle. In other words, the starting point for the sentencing of the crime of embezzlement of public office should still be 60,000 yuan.
02 What behaviors are considered as embezzlement of public office?
For a company like Shucang, in order to safeguard the company’s property interests, it is necessary to pay attention to and investigate and collect evidence in cases where employees are suspected of embezzlement of public office during anti-corruption investigations. Based on the practical experience of our law firm, lawyer Liu has summarized the common behaviors of Shucang employees in embezzlement of public office:
The first situation is when company employees, while issuing digital collectibles on behalf of the company, use their position to purchase relevant whitelists or collectibles through their controlled accounts. They then use their position to obtain insider information and sell the collectibles on the secondary market for personal gain. At first glance, this behavior may not meet the elements of “illegally taking possession of the unit’s property” in the crime of embezzlement of public office. However, upon careful analysis, it is not difficult to find that this behavior essentially involves employees taking advantage of their position to artificially increase a transaction link, that is, employees purchasing digital collectibles from the company and then selling them on the secondary market. In this case, for the company, it loses the opportunity to sell the digital collectibles as the seller at a reasonable price; for the buyer of the digital collectibles, they lose the opportunity to directly trade with the company on a fair basis and can only purchase the digital collectibles from company employees at a high price on the secondary market. From the perspective of the substantive act of criminal law, the employees have taken possession of the company’s future earnings, and they are still suspected of committing the crime of embezzlement of public office.
The second scenario is when employees, taking advantage of their managerial positions, privately transfer unsold remaining digital collectibles from the company for their own possession and then sell them for profit on the secondary market. This behavior is a typical case of embezzlement and does not require much legal analysis.
The above two scenarios are more common forms of embezzlement in practice. It cannot be ruled out that there may be other modes of embezzlement in the complex reality of life waiting to be discovered or even “invented”. Lawyer Liu will also analyze and explain these cases for everyone.
03 How can a digital collectible company prevent embezzlement?
For a digital collectible company, in addition to ensuring compliance with daily business operations, it should also pay attention to the development of anti-corruption and anti-embezzlement measures within the company. In reality, there are countless modes of embezzlement, and they are likely to be constantly evolving and innovating. Once internal fraud and corruption, including embezzlement, erupt, they often deal a fatal blow to the company – as the saying goes, it is easy to defend against external enemies, but difficult to guard against internal thieves.
In addition, the digital collectible company should also standardize the registration and internal management processes of digital collectibles, form 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 prohibiting employees from participating in secondary market transactions, and elevate them to company “red line rules” to cultivate employees’ bottom line awareness and prevent embezzlement at the company’s institutional level.
Finally, the digital collectible company can also invite external lawyers to assess and examine the company’s development quality, compliance systems, etc., in order to ensure the company’s long-term development.
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