Legal Risk Prevention Guide for Web3 Developers

Today, Web3 projects are flourishing, but they also harbor numerous legal risks. As a developer, how can you avoid pitfalls? This article will analyze four common high-risk project models to help developers establish basic risk identification capabilities.

1. The Crime of Operating a Casino: Hidden Traps in GameFi Projects

In the Web3 field, gambling-related projects are the most dangerous areas for technology developers, especially common in GameFi and blockchain gaming projects. A typical case is the "BigGame case," where the development team built an on-chain platform that allowed users to bet using virtual currency, ultimately constituting the crime of operating a casino. This indicates that even if they do not directly operate the platform, technical personnel who deeply participate in system development may also be held criminally liable.

High-risk patterns that developers need to be aware of include:

• Decentralized applications for gambling
• Online casinos that use virtual currency for betting
• Chain games with random gameplay such as lottery and unboxing.

II. The Crime of Organizing and Leading Pyramid Selling Activities: Traps Hidden in Incentive Mechanisms

The concealment of this crime lies in its frequent packaging as "new user promotion," "community incentives," and other forms. The commission, fission, and invitation reward mechanisms commonly seen in Web3 projects can easily cross legal red lines.

High-risk patterns to watch out for include:

• Air coin projects that acquire investment qualifications through "paying money"
• Multi-level reward structure, recruiting people for rebates and developing downlines
• Node plans or ambassador mechanisms that rely on "headcount" to generate profits

An example is the "3M platform pyramid scheme". This platform designed two structures: static income and dynamic income. Ultimately, it was identified as a pyramid scheme due to reasons such as the membership level exceeding three tiers.

3. Crime of Illegal Absorption of Public Deposits / Fundraising Fraud: Legal Risks of Token Issuance Financing

In our country, it has long been clear that ICOs are considered illegal financial activities. If technology developers are deeply involved in the development of token issuance systems, mining machine rebate logic, and other modules, even if they do not directly raise funds, they may still be held legally responsible.

High-risk mode includes:

• Unauthorized issuance of tokens for financing without permission
• Promises of high returns, static dividends, capital protection buyback
• Fictional financial platforms, mining machine investment platforms
• Establish a fund pool for token or point redemption within the platform

The "AIP platform case" is a warning case; this project built a complete token trading and points release system, which was ultimately deemed to be illegally accepting public deposits.

IV. Crime of Illegal Business Operations: Legal Risks of Virtual Currency Trading Platforms

In recent years, judicial authorities have intensified their crackdown on crimes in the foreign exchange sector, with virtual currency trading being a key focus area. Developers responsible for building core components such as cryptocurrency matching systems and OTC trading modules face significant legal risks.

High-risk behaviors include:

• Provide payment settlement, over-the-counter (OTC) services, token redemption, and other functions.
• Platforms operating with a fiat currency trading entry that includes RMB without permission
• Provide matching intermediary services for virtual currencies and foreign currency arbitrage.

For example, a developer was sentenced to imprisonment for setting up a virtual currency matching exchange platform, charged with illegal business operations.

Conclusion

This article outlines four common high-risk patterns in Web3 projects, hoping to help developers establish basic risk identification skills. However, knowing the red flags is far from enough. How to quickly assess project risks, evaluate one's own legal responsibilities, and what compliance measures to take in practical work will be elaborated in more detail in subsequent articles.