Chinese Courts Says OKCoin Operates Illegally, Awards Damages

August 15, 2016 11:05 UTC

A Chinese court has awarded damages against China’s popular bitcoin exchange, OKCoin, after it was alleged that the company was aiding criminal money laundering and wasn’t properly registered.

The court decision only affects OKCoin’s China-based bitcoin exchange, OKCoin.cn, and not its international exchange, OKCoin.com; however, it’s the first significant ruling by a court against a bitcoin exchange. OKCoin’s parent company is Lekuda.

According to court documents, Huachen Commercial and Trading Co. Ltd., the defendant, claimed that an individual had defrauded it of 12 million Chinese yuan ($1.8 million USD), which was then laundered to buy bitcoin before the money was withdrawn to a Macau account.

The court found that the criminal had managed to set up several accounts on OKCoin by utilizing fraudulent identity documents that had been bought online. As a result, the court disapproved of OKCoin’s procedure when it comes to reviewing users’ identities, stating that opportunistic criminals can use the bitcoin exchange to launder money with no fear of a reprimand.

No Bitcoin Legislation in China

Presently, there is no legislation in place to regulate bitcoin in China; however, the court decision found that OKCoin was working illegally, stating that its license doesn’t cover its bitcoin exchange business.

According to a posting on Reddit, the judgement said that OKCoin “should register at the administration of Industry and Commerce and get a business license.”

It added:

Lekuda company registered business scope only includes such areas: technology development, transfer of technology, technical services, technical marketing, consulting and investment management. Trading bitcoin for profit-making purposes is beyond the range permitted by the administrative authorities.

Initially 80 percent of the damages were awarded to the defendant company; however, this was later brought down to 40 percent.

Featured image from Shutterstock.