China’s First Crypto Fraud Criminal Case

A college student in China has been sentenced to over four years in prison for crypto fraud pertaining to issuing and withdrawing a self-created token.

Yang Qichao was convicted of crypto fraud after issuing a virtual currency called Blockchain Future Force (BFF) and subsequently withdrawing its liquidity, which resulted in substantial financial losses for an investor, as reported by The Paper.

Yang Withdraws Liquidity After Its Release

In May 2022, Yang observed a decentralized autonomous organization (DAO) called Blockchain Future Force, encouraging the community’s decentralized crypto to be launched soon. Yang became enthralled and ultimately resolved to establish his cryptocurrency on the BNB chain.

On the same day, Yang issued the BFF token that bears his name and initially increased liquidity by coupling 300,000 BSC-USD with 630,000 BFF tokens.

Yang withdrew the funds shortly after adding liquidity, a process called “liquidity withdrawal.” This action had a substantial impact on the value of the BFF tokens, resulting in a loss for investors who had acquired them.

Just before Yang’s withdrawal of liquidity, Mr. Luo, one of these investors, exchanged 50,000 BSC-USD for 85,316.72 BFF tokens. Consequently, Luo’s investment experienced a rapid depreciation, resulting in a mere fraction of its original value.

Luo was able to locate Yang through a mutual acquaintance on WeChat and requested compensation for his losses. Luo reported the incident to the police when Yang refused, alleging that he was defrauded of more than 300,000 yuan (approximately 50,000 USD).

After starting a criminal investigation into possible cryptocurrency fraud, the police arrested Yang in November 2022. On February 2, 2024, a court in Henan found Yang culpable of the crypto fraud, which resulted in a four-year and six-month prison sentence and a 30,000 yuan fine.

First Criminal Case Involving Crypto Fraud in China

On May 20, the second trial of the case was conducted at an intermediate court, and Yang’s defense attorney continued to advocate for his innocence.

The defense contended that the defendant and the plaintiff were both seasoned crypto players aware of the hazards associated with speculating in them.

Additionally, the plaintiff’s BFF coins experienced an increase in value after the incident due to increased liquidity. Consequently, the plaintiff could redeem more USDT than previously, resulting in no actual losses.

The report asserted that this case, which was brought to court to withdraw liquidity after the issuance of virtual currency, is the first of its kind in China. In China, virtual assets are not legally recognized, and investors are responsible for any losses incurred during the investment process.