Taihe Research | Using proceeds of crime to tip livestreaming hosts: a criminal judgment orders the platform to refund the full amount—procedural and substantive disputes over “criminal–civil intersection”

The perpetrator used the proceeds of fraud to make platform tips totaling over RMB 8 million. Can the people’s court, in its criminal judgment, order the platform to refund the full amount? Recently, a certain intermediate people’s court issued a retrial ruling, holding that the platform must refund the entire sum.

I. Case Summary

Zhang, an employee of the company, solicited funds from relatives and friends under the pretext that the company needed bridge financing, promising high-interest returns. However, such a Ponzi scheme is inherently unsustainable; once the funding chain collapsed, Zhang was prosecuted for fraud.

While tracing the flow of funds, the public security authorities discovered that Zhang had used over RMB 8 million to tip livestreaming hosts on a certain platform. Upon accepting the victim’s mandate, we participated in the first-instance criminal trial as litigation agents, submitting our views on the facts of the case and the applicable laws. During the trial, we argued that the people’s court should order the platform company to refund the full amount of the tips.

Following the conclusion of the criminal conviction and sentencing phase, the people’s court convened the procuratorate, the platform company, the defendant, the defense counsel, and the victim’s legal representative to engage in thorough presentation of evidence and oral argument regarding whether the platform should bear liability for restitution. Subsequently, the court of first instance ruled that the platform company was liable to make full restitution. At the platform company’s request, the municipal procuratorate filed a protest, and after a retrial, the intermediate people’s court ultimately ruled that, after deducting a very small portion corresponding to unsuccessful tipping transactions, the remaining amount was to be returned by the platform company to the victims. Thus, this litigation, which had spanned three and a half years, finally came to a close.

II. Dispute in the Case

In the litigation, the platform company submitted the following arguments:

1. The platform company has no obligation to verify the source of funds and is unable to do so; it acts in good faith. Moreover, the services provided by the platform offer significant emotional value and are highly scarce, making substantial tips entirely reasonable.

2. The platform company has fulfilled its regulatory obligations, having established an early-warning mechanism in accordance with the law. Rewards exceeding a reasonable threshold would trigger such a warning; however, in this case, the mechanism was not activated.

3. The platform company receives only a very small portion, with the majority going to the streamers; requiring the platform company to refund the full amount would be unreasonable.

4. Whether the platform should refund the reward payments at issue is a civil dispute and should not be determined through criminal proceedings. Moreover, the platform company lacks the right to appeal, making it highly likely that this case will be final at the first instance.

In response to the above comments, we hereby provide the following reply:

1. The platform company does not qualify as “bona fide.” In its regulations on criminal enforcement, the Supreme People’s Court distinguishes between whether the recipient of funds is “bona fide”: if bona fide, the funds may not be recovered; if not bona fide, they shall be recovered. However, this provision merely uses the term “bona fide” without specifying clear criteria for determining bona fide status. In practice, many interpret “bona fide” in this context as referring to “bona fide acquisition,” a view with which we disagree.

First, in criminal law, “good faith” should be understood as a general assessment of whether the other party’s conduct is reasonable; if one can recognize that the other party’s conduct is unreasonable, then such conduct cannot be deemed to be made in good faith. This differs from the concept of “good faith” in civil law’s doctrine of “acquisition in good faith,” where good faith refers to the absence of gross negligence—a standard that is considerably higher than that of ordinary, general‑purpose judgment. This distinction serves to protect the interests of victims in criminal proceedings.

Secondly, the bona fide acquisition regime expressly excludes the application of stolen goods (save in exceptional circumstances), because such items have been divested of possession not on the basis of a genuine expression of intent. Similarly, fraudulently obtained property is also lost through a non‑genuine manifestation of intent; the two share this common characteristic, and therefore are likewise ineligible for the bona fide acquisition regime.

Third, even if the bona fide acquisition regime applies, the acquirer must pay a reasonable consideration. In this case, however, the platform company received “tips”—tips that far exceed what is socially deemed reasonable—because the platform merely provides the venue, and the streamer offers only services such as chatting. The tip amounts substantially surpass the bounds of reasonable consideration and bear the character of reckless extravagance; the platform should have been aware of this. The platform contends that its services are akin to VIP seating at a concert, conferring emotional value and scarcity. Yet, when compared with the price of a VIP box, the funds it has collected clearly exceed any reasonable threshold. Moreover, anyone can watch the platform’s streamers perform, so there is no genuine scarcity. Consequently, even by comparison with the ostensibly opulent VIP boxes at concerts, the sums received by the platform remain far beyond what could be considered reasonable.

2. With respect to the platform company’s assertion that it has fulfilled its reasonable duty of supervision, we respond as follows.

First, reasonable regulation entails not only the existence of regulatory measures but also their reasonableness. According to the platform’s defense, it observed that the transaction records showed the defendant had made substantial donations within a short period, yet it failed to implement any inquiries or supervisory measures, thereby falling short of its duty to exercise reasonable oversight.

Secondly, even if the platform has established an early-warning mechanism, it was unable to detect the circumstances in this case; therefore, the regulatory mechanism lacks effectiveness.

3. With respect to the platform’s claim that it has only obtained a portion of the funds, we submit the following:

In the tripartite relationship among the platform, the streamer, and the audience, the audience establishes a legal relationship with the platform but not with the streamer. The funds from audience tips are deposited directly into the platform’s account, after which the platform and the streamer allocate the proceeds according to their mutual agreement. Consequently, the manner in which the platform and the streamer divide the revenue is irrelevant to the audience and cannot serve as grounds for the platform to infringe upon the audience’s rights.

4. With regard to the procedural issues, our views are as follows.

Criminal judgments shall order the recovery of funds obtained through unlawful or unreasonable means. No appellate procedure is provided for the recovery of criminal proceeds; in criminal cases, the recovery of such proceeds is, in the vast majority of instances, final at the first instance.

In summary, we contend that the platform company acted in bad faith and therefore cannot acquire the disputed reward payments in good faith; nor did it fulfill its reasonable duty of oversight. The platform’s practice of distributing the majority of the funds to the streamers constitutes an internal allocation of rights, which it seeks to invoke against the rights holder. In this case, the platform has already safeguarded its procedural rights. Accordingly, the court should order the defendant company to refund the full amount of the reward payments. The first-instance court correctly found that the platform failed to discharge its management obligations and did not pay fair consideration, thus warranting a full refund.

Following the first-instance judgment, the platform company petitioned the procuratorate to file a protest; in accordance with the law, the Municipal People’s Procuratorate instituted such a protest, and the Municipal Intermediate People’s Court ordered a retrial. Although we were not permitted to participate in the retrial proceedings, the final decision was rendered by the Intermediate Court’s adjudication committee, which ruled that, after deducting several hundred thousand yuan corresponding to unsuccessful tips, the remaining amount would be refunded by the platform company.

III. The Significance of This Case

In this case, the people’s court convened the prosecutor, the platform company, the defendant, the defense counsel, and the victim’s legal representative to participate in the trial, thoroughly heard the views of all parties, and carefully determined the applicable criminal and civil legal norms. The judgment rendered was grounded in the platform company’s liability, thereby striking a balance among its rights, obligations, and responsibilities. Subsequently, during the retrial proceedings, the matter was re-examined at a higher judicial level, affording the platform company robust safeguards both substantively and procedurally.

Attorney Sun Guanzhong, The firm’s principal practice areas include criminal defense in economic and official‑duty crimes, representation in criminal complaints, the establishment of corporate criminal risk management systems, as well as litigation and non‑litigation legal services related to securities compliance for listed companies, cross‑border criminal–civil issues in bulk trade, and the prevention and control of criminal risks.