College Student Sentenced for Crypto Fraud in China

A Chinese college student, Yang Qichao, has been sentenced to over four years in prison for committing crypto fraud related to the issuance and withdrawal of a self-created token. This case marks a significant legal precedent as it is the first criminal case involving crypto fraud in China, where virtual assets are not legally recognized.

Incident Details

1. Issuance of Blockchain Future Force (BFF) Token:
- In May 2022, Yang created the BFF token on the BNB Chain.
- He initially added liquidity by pairing 300,000 BSC-USD with 630,000 BFF tokens.

2. Liquidity Withdrawal:
- Shortly after adding liquidity, Yang withdrew the funds, an act known as "liquidity withdrawal."
- This move caused a significant devaluation of the BFF tokens, leading to financial losses for investors.

3. Investor Impact:
- One investor, Mr. Luo, exchanged 50,000 BSC-USD for 85,316.72 BFF tokens just before Yang withdrew the liquidity.
- Luo’s investment rapidly depreciated, causing him substantial losses.

Legal Proceedings

1. Tracing and Reporting:
- Luo managed to trace Yang through a mutual WeChat friend and demanded compensation.
- After Yang refused, Luo reported the incident to the police, claiming he was defrauded of over 300,000 yuan (approximately 50,000 USD).

2. Arrest and Trial:
- The police initiated a criminal case for suspected crypto fraud, leading to Yang's arrest in November 2022.
- On February 2, 2024, a court in Henan found Yang guilty of crypto fraud, sentencing him to four years and six months in prison and imposing a 30,000 yuan fine.

3. Defense Arguments:
- During the second trial held on May 20 at an intermediate court, Yang’s defense lawyer argued for his innocence.
- The defense claimed both parties were experienced crypto traders aware of the risks.
- They also argued that the value of BFF tokens increased due to added liquidity, implying the plaintiff could redeem more USDT than initially lost.

Significance of the Case

This case is noteworthy for several reasons:

- Legal Precedent: It is the first criminal case in China involving crypto fraud, setting a precedent for how similar cases might be handled in the future.
- Regulatory Context: In China, virtual assets are not legally recognized, and investment losses are typically borne by the investor. This case challenges that norm, highlighting potential changes in legal interpretations and enforcement.
- Investor Protection: The ruling underscores the need for investor protection in the largely unregulated crypto market, emphasizing the legal consequences of fraudulent activities.

Conclusion

The sentencing of Yang Qichao for crypto fraud underscores the growing scrutiny and legal repercussions of fraudulent activities in the crypto market. As the first of its kind in China, this case could influence future regulatory and legal approaches towards virtual assets in the country.