One of the largest China’s bitcoin exchanges is found guilty by the Chinese court of aiding criminal money laundering and improper company registration.

The court's decision is applied only to the parent company, the Chinese trading platform OKCoin.cn. The ruling does not affect the international exchange OKCoin.com. However, this is the first significant decision of the court in relation to the regulation of the bitcoin market in China.

The decision was published on 29 July but did not reach world media until today.

According to court documents, the case began in 2014, when the company Huachen Commercial and Trading Co. Ltd. claimed that criminals defrauded it of 12 million yuan ($1.8 million), which were then laundered by buying bitcoins on the OKCoin platform. The company blamed the Chinese exchange for aiding criminals. Initially, the court awarded 80% of damages, however, as a result of the appeal, the company was able to reduce the amount to 40%. The judges concluded that the criminals managed to create multiple accounts on OKCoin using forged identity documents purchased online. Thus, the court stated that the exchange did not properly review the question of the security and allowed the fraudsters to freely perform illegal operations with stolen funds.

In addition, during the investigation, it was revealed that OKCoin had no license to perform exchange of bitcoins to fiat currency. It should be noted that until now China lacks actual regulation of digital currencies including any direct requirement to obtain a license to run bitcoin exchanges.

“To the end of the trial, Lekuda failed to provide related materials recorded at the Telecommunications Authority registration .The address/domain name record information is not stamped with the seal of the Department, and it could not prove its effectiveness,” the judgement states, according to the translation published on Reddit.

The court ruled that OKCoin “should register at the administration of Industry and Commerce and get a business license.”

Earlier, in 2014, the Chinese government tried to regulate cryptocurrency exchanges by forbidding them to perform direct transfers to banks and demanded five major trading platforms to sign a statement warning their customers of the risks associated with speculation with bitcoins.

Lena Gabdullina