Beijing Fengfujiuxin Marketing and Technology Co. Ltd. v Zhongyan Zhichuang Blockchain Co. Ltd.

Summary:

In May 2019, Beijing Fengfujiuxin Marketing and Technology Co. Ltd. (“the plaintiff”) and Zhongyan Zhichuang Blockchain Co. Ltd. (“the defendant”) signed three contracts that stipulated the plaintiff would purchase 1,542 micro data storage servers for bitcoin mining and transfer 93% of the profits from the mining to the plaintiff as either fiat currency or bitcoin. The plaintiff paid RMB 100 million to purchase the facilities and maintain their operation. The defendant paid 18.3463 BTC but stopped sharing the profits from the mining operation afterward. Therefore, the plaintiff sued and sought damages of 278.1655 BTC or USD 95.5 million (roughly RMB 67 million).

On December 14, 2021, The District Court of Chaoyang in Beijing rejected the plaintiff’s claims, as the contractual arrangement is voided. According to Article 52(4) of the Contract Law, a contract is void if it harms public interests. To determine the requirements of public interests, the court turned to several “notices” and “announcements” issued by various governmental departments, including the People’s Bank, Ministry of Public Security, NDRC, and Supreme People’s Court, on the prevention and resolution of risks of virtual currency trading. The court found that, according to these policy documents, cryptocurrency-related activities consume an immense amount of energy and can create instability in the financial market, therefore going against public interests. As a result, the contractual arrangements between the parties are invalid because they jeopardized public interests. Unsatisfied by this decision, the plaintiff appealed to the Intermediate People’s Court.

On July 7, 2022, Beijing Third Intermediate People's Court dismissed the plaintiff’s appeal. It upheld both the decision and the reasoning of the court of first instance.

At Issue: Plaintiff's asserted claims of breach of contract and seeks to recover damages from the defendant.